By Nicole Friedman
Insurance brokerage Aon PLC has agreed to acquire startup CoverWallet, as insurers are competing to figure out how to sell insurance to small businesses online.
CoverWallet, founded in 2015, is an online insurance platform that allows small and midsize businesses to get price quotes and buy policies for liability, workers' compensation and other types of insurance without speaking to an agent.
The companies announced the deal Wednesday. Financial terms of the deal weren't disclosed.
Insurance companies are eager to expand in the small-business insurance market, which is estimated to represent approximately $100 billion in premiums in the U.S. The U.S. small-business insurance market grew faster than the overall commercial insurance market between 2015 and 2017, according to a study released earlier this year by investment-management firm Conning.
Travelers Cos. bought U.K.-based Simply Business, a small-business online insurance broker, in 2017 for about $490 million. Warren Buffett's Berkshire Hathaway Inc. started selling small-business insurance online through its biBERK brand in recent years and earlier this year launched a new policy for small businesses, called THREE, that combines a variety of insurance policies into one three-page policy.
Insurers are betting that advanced data and analytics can help them price policies for these customers more accurately and cheaply. Small-business insurance is a popular space for startups focused on insurance technology, or "insurtech."
But convincing small-business owners to buy insurance online has been a slow process. Online sales account for less than 5% of small-business insurance sales and could grow to 12% by 2023, consultant Novarica said in a February study.
Shopping for insurance can be an onerous process for small businesses, as each insurer can require an application, with dozens of questions to answer. The majority of small businesses in the U.S. rely on agents to help them navigate the process and advise them on which policies to buy.
CoverWallet offers one streamlined application that can autofill data pulled from outside sources and cut down on the number of questions.
"The way the insurance market works today is very manual," Inaki Berenguer, CoverWallet's chief executive, said in an interview. "We are leveraging data science and technology to make this process very simple."
The company has bet that as younger, tech-savvy entrepreneurs start businesses, they will prefer to handle their insurance buying online. Most CoverWallet customers have fewer than 150 employees, and many of them buy insurance outside business hours, Mr. Berenguer said.
CoverWallet also has a version of its platform for agents to use when helping their clients, an acknowledgment that most small businesses still prefer to speak with agents.
The startup's investors include insurers such as Maurice R. "Hank" Greenberg's Starr Cos. and Zurich Insurance Group.
Write to Nicole Friedman at email@example.com