Small business insurance options and coverage

¶ … particular types of businesses (for example, convenience stores or auto dealers), Federated emphasizes macrosegmentation. To further sharpen strategy, suggest possible ways that particular macrosegments could be broken down further into meaningful microsegments.

Different businesses have different needs. For example, jewelers have a specific need to insure high-risk goods which can be stolen and thus need casualty insurance to protect these vital assets; auto dealers may likewise need to insure their cars which may become damaged in a hailstorm or flood. In contrast, businesses dependent upon the labor of workers in high-risk occupations such as machine shops and building contractors would need to have insurance for their employee's on-the-job hazards in the form of worker's compensation, a specific kind of causality insurance. "Property casualty insurance can also be called property liability insurance. Whatever you call it, what it does is help protect you against financial losses that come as a result of being held legally liable for an accident that causes damage to another person or another person's belongings" ("What is property casualty insurance," All State).

Businesses which employ a large sales force of permanent employees (including administrative staff and salespersons) may wish to offer competitive benefits packages to attract high-quality talent. Thus some small businesses are more concerned with protecting their property; others with protecting their workers; and still others with getting low-cost health insurance and retirement insurance to extend to valuable employees or extend to the business owners themselves, given that most small business owners must purchase insurance on the open market.

In light of this diversity, insurance companies that cater to small businesses must practice market macrosegmentation. Such macrosegmentation might go as follows:

Small businesses with low labor needs and high-risk property: These would include jewelry shops, convenience stores, and gas stations all of which face a substantial risk of a break-in and face threats to either merchandise or cash on hand.

Small businesses with high labor needs: These might include auto and tire dealers, building contractors, equipment sales, and other dealers which offer competitive benefits packages to salespersons and other critical workers.

High-risk labor-related businesses: These would include businesses such as building contractors or lawn service companies in which employees are at significant risk and thus worker's compensation would be required for these employees.

Small, low-risk businesses: These include funeral service businesses and other relatively low-risk businesses in which the sole or joint proprietors might merely need health insurance for themselves as independent proprietors.

Q2. In buying insurance, some SMB customers just want the lowest-priced option for each type of insurance, whereas others want value-added services (for example, risk-management guidance) and a complete, integrated insurance solution. How should Federated respond to customers who are strictly focused on price? In your view, what are the points of difference that Federated should illuminate in the customer value proposition?

Strictly focusing on price seems like a good idea until something actually happens and then the need for more comprehensive insurance becomes apparent. Statistically demonstrating the risk of specific industry-specific liabilities which might occur can be a persuasive tool to encourage businesses to more significantly invest in insurance. An injured worker, a major theft, or the illness of the business owner are examples of events which can potentially bankrupt a small business which lacks adequate insurance. A small business may think that because it has fewer financial resources it should try to 'get away' with insuring itself less. But because it has less ability to absorb the costs of a loss (unlike a large corporation), it is in fact small businesses that cannot afford to be under-insured.