Winning Over the Mid-Market

The mid-market segment — a coveted segment in the insurance marketplace — can pose a bit of an enigma for brokers and carriers alike. Although firms in this segment face many of the same risk management challenges and issues as their larger counterparts, the resources available to the mid-market segment are fewer and risk management solutions are typically designed for super-sized firms. Finding solutions tailored to the mid-market segment can be tricky.

In order to capture this unique market, questions need to be asked. What do mid-market companies want from their insurance providers? What can insurers and brokers do to win in this market? How much is really known about this particular segment? What do firms in this segment need, but maybe don’t even realize that they need? What motivates them to buy and to stick? And what can the insurance market do to attract and retain these companies?

The answer to many of these questions, I believe, is risk management.

How far have small-and medium-sized businesses travelled down the risk management road? Data is scarce, if non-existent. I suspect one reason for the lack of data is the fact that many of the firms in this size segment just aren’t implementing risk management programs.

In an informal online survey, I recently posed three questions on LinkedIn:

• Do mid-market companies want or need risk management?

• Should insurance brokers be doing more risk management for their clients?

• Is insurance a commodity, or are insureds looking for added value?

These questions get to the heart of the matter, which is: Do mid-market companies want help managing risk, or do they just want cheap insurance?

Summarizing the responses, the mid-market companies surveyed would employ more formal risk management if they understood it better, if the return on investment was clear and if they were capable of doing it without distracting from core business.

Respondents said they would like their insurance brokers to help them see the value in risk management and find solutions. As for insurance as a commodity, the mid-market generally sees it as such, but only because they haven’t witnessed any additional value.

Aside from not being aware of risk management and its value, the mid-market traditionally has not been offered a lot of options. Mid-market companies have the same issues with risk as large companies (just on a smaller scale), yet the solutions available don’t scale down to fit. Large companies hire risk management departments and buy enterprise software, but what solutions do mid-market companies have?

Very large insurers and brokers have the internal resources to add value, but are they using them for the mid-market? In my experience, most of the in-house risk management and loss control consulting and software is designed and priced for the upper end of the market. Many regional brokerages have little or no in-house risk management or loss control consultants or software.

So what are insurers and brokers to do? I have long contended that small-and medium-sized businesses don’t understand risk and risk management well enough to know that they are already using it. Everything they do for quality control — all of the measures taken to improve service, reduce downtime, increase efficiency and prevent losses — represents a type of risk management. Two things missing from this mid-market approach are awareness and solutions. Who better to fill these gaps than the insurance industry?

Insurers generally don’t have hands-on contact with mid-market clients. But they can provide tools and resources to brokers, and many do. I think a greater emphasis needs to be placed on innovation in finding and creating solutions made to fit the mid-market. This is an alternative to the current focus, which is to try and make the high-end solutions fit.

As well, insureds need incentives. They need to be able to see a direct cause and effect between managing risk and seeing returns.

Brokers have the biggest role to play. By working with clients towards risk improvement, as opposed to risk transfer, brokers will educate their clients, and add value and build relationships.

If mid-market companies employ more risk management and formalize it, they will improve their cost of risk and profitability over time. If brokers step up to help them achieve this, they will attract and retain clients and be more profitable. In turn, insurers will create a more profitable book of business. Everyone wins!

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Mid-market companies generally see insurance as a commodity, but only because they haven’t been offered the added value of risk management.