Alan B
Senior SEO and Internet Marketing Consultant at Hey Dude Where's My Site?
Business insurance for a small company - is it more cost effective to deal with a local agent / broker, or to use an online service provider?
Having just launched my latest venture, I'm in need of general liability, E&O and property insurance - given how eSurance and half a dozen similar providers have become a well established source for personal auto insurance, can the same case be made for business insurance when it's a 1 - 3 person company that doesn't yet have a physical office (other than home offices), and where the business is web site search engine optimization consulting and occasional programming / design?
Location specific: San Francisco Bay Area
Good Answers (7)
Gordon C
Commercial Insurance Specialist / Risk Management Consultant
Best Answers in: Business Insurance (2)
Alan - Okay, I may be a little biased here because I'm an agent, but for business insurance I don't know of any low cost on-line providers. Sure there are a lot of aggregators that will take your underwriting information and shoot it out to a dozen of agents who will quote the account "the traditional way" using main line insurers and get back to you with a proposal. So, in that sense there is some market efficiency. But, let's face it, you need someone with expertise that is going to guide you through your growth stage and provide you the protection you need now and in the future. You don't want to risk the investment in your business to a cut rate insurance agent or web site that could prove to be fatal do you?
My advice; there's probably tons of folks you know that do what you do and have purchased insurance before and have a good to great relationship with their agents. Ask around for references, call two to four agents, phone interview them, ask them what their level of expertise and experience in web start ups is, and ask for their references then and select one. The diligence you put into it now can help stave off problems down the road.
In today's information jammed world, everyone wants to DIY (do it yourself) if they think they can save money. The simple truth about insurance is that you can't DIY it and save money. Agents and brokers earn a commission from the insurer for delivering the product to you and their expertise.
Hope that helps.
Gordon B. Coyle
Hussain A
Consulting Actuary at Towers Perrin
Best Answers in: Risk Management (2), Business Insurance (1)
I am not sure if you can even purchase business insurance "purely" on-line.
Part of the reason companies have had such great success selling personal lines (and specially auto) insurance online is because these are now largely priced and sold based on Generalized Linear Models (GLMs). This means they are sold based on arithmatic formulae and require minimal "underwriting". And since majority of the claims are relatively small, servicing them via call centres makes financial sense.
When you talk of commercial insurance, the risks tend to get complicated. You exposures to GL and E&O can be very complex depending on what kind of business you are in. While there is significant progress made in the GLM work for commercial lines, individual businesses need to go through separate underwriting processes.
So generally, even if you go to a website and ask for a business insurance quote, they will refer you to their local agent. So if you have a specific company in mind, contact their agent (or go to the website and the agent will call you). Else go to a broker and ask for quotes from multiple companies.
You may also be interested in looking at this website http://www.insureuonline.org/smallbusiness/
It is always better to work with a local agent than directly with an insurance company because an agent has access to several different companies and a variety of insurance packages and programs. Expert knowledge in insurance and having the ability to shop around with several different insurance companies to find you the best product and price is what makes the local independent insurance agent the better choice.
I would most always suggest speaking to an insurance agent, whether it's over the phone, and/or, in person. Business insurance has it's own exposures, and you mention that you are working the business out of your home(s). Having a business in your home, could have a major impact on your homeowner's (renter's) insurance, since most policies severely limit the coverage that's provided for business equipment in your home. You do have the ability to increase many of these coverages, but they still may not be sufficient to cover your exposure.
A few other questions that come to my mind right away, are including; where do you meet clients/potentital clients? Do employees drive their own vehicles to meet with clients/potential clients? Who is liable for the actions of the employees?
These are just a few that come to mind. By all means speak to a licensed agent, and use a reputable insurance carrier. You can review the company's information at www.ambest.com or contact your state Department of Insurance.
Good Luck with your new endeavour!
Alan, you pose a very interesting question. If I were starting a new small business, it would certainly be a question in my mind. And I agree with you that many eSurance companies have established themselves pretty well in providing risk protection products online. Perhaps these days they offer BOPs that are comparative to the "big guys" products. I would certainly say that, in the current soft market, getting a quote from an online facility and comparing it to what a local agent/broker is in order. This would also show prudence on your part to any future investors. Go for it. Good luck!!
It is always more cost effective to deal with a local agent /broker than an online service provider because the local agent can customize the plan to fit your exact needs, and is always there to answer your questions. The personal touch is important to all of my clients, and knowing they will always have the same person to talk to when they have a problem gives them real peace of mind...they won't have to repeat their story a number of times to bring each contact up to date just to get an answer to a question - I am their contact and I am familiar with them and their case, I will get them answers.
I think you should deal with an agent since, really, you only think you know what insurance you need. An experienced agent will be able to assess your needs and help you find your most cost-effective solution--that's what they do for a living! I will mention that your stated needs--E&O, general liability, and property insurance--may call for different providers.
Also, as you grow your company--hopefully!--your insurance needs will evolve, from simple liability to business continuation, disability, health, and other benefits. Find someone who will help you grow!
Good luck with your new venture.
