Business Insurance Buyers Most Influenced by Friends and Peers

A little help from your friends -- referralsReferrals — time and again we hear how important they are. Buying business insurance is no different.

In a recent survey, the majority of small business owners say when buying business insurance, they are most influenced by referrals from friends and peers. That’s especially true among those without business insurance — almost 63% rank referrals from friends and peers as the most influential factor in buying insurance. And even for those who already have insurance, 54% said referrals were very influential.

And what influences small business owners buying business insurance the least? Direct mail.

I have a theory as to why referrals are so important. I think a lot of it comes down to complexity. We all would love to have business insurance simplified for us — and getting a referral helps make it simpler.

As more support for my theory consider one other result in the same survey. Over 73% of those without insurance said the most irritating thing about buying insurance is the explanation of coverage options. Yep, wading through all that legalese is nobody’s idea of fun.

Another reason referrals get so much weight: we tend to put our trust in peers and friends.

This information is from a survey about business insurance that I invited you to participate in about a month ago here on the site.

The survey was put together by Terri Lonier of Working Solo. It was sponsored by TechInsurance Group, LLC, America’s leading online provider of insurance to IT businesses and a wide range of solo professionals — www.techinsurance.com and www.businessinsurancenow.com.

See the summary survey results (Word .doc) — lots of interesting stuff there.

10 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

10 Reactions

  1. Yep, insurance is a necessary evil but not always easily understood or explained for that matter. There is no doubt that I would use a recommended company over an unknown company any day. I like to know what I’m getting and that I can trust them 100%.

  2. This is both encouraging and worrying at the same time. It is encouraging that if you do a good job you’ll get referrals but worrying in that a lot of businesses have no idea what types of insurances they need and getting advice from friends isn’t really the best place.

  3. This is both encouraging and worrying at the same time. It is encouraging that if you do a good job you’ll get referrals but worrying in that a lot of businesses have no idea what types of insurances they need and getting advice from friends isn’t really the best place.
    OH! You’re my new favorite blogger fyi

  4. The use of referrals is why network marketing has become an important alternative to the traditional distributing channels, e.g. brick and mortar stores.

    I still think that “direct snail mail” will continue to be used as a marketing channel, but it has to evolve and become more “social” in a way. Connect and interact with potential customers.

    Have you seen websites that is compare and contrast different business insurances?

    I recently attended a BNI (Business Network International) meeting and there I saw how personal business contacts led to business deal, e.g. members who gave other members orders to take care of their pension fund savings and investments. At this meeting you had representatives from banks, insurance companies, marketing and PR, etc. I was a guest at the meeting and got 30 seconds to present myself.

  5. Business Protection, I think that if insurers and agents got better at explaining coverage in plain English there might be a greater tendency to go direct to the source for information.

    But when you need to be a lawyer to understand the terms of coverage, no wonder business owners throw up their hands in defeat and figure “I’ll just ask Mary or Sam.”

    I see there’s a movement in your country toward plain English: http://www.plainenglish.co.uk/

    Anita

  6. Martin, I haven’t seen any websites that compare and contrast business insurance.

    I know that http://Techinsurance.com, which sponsored this survey, represents multiple carriers and has information about various types of insurance on its website. However, I don’t believe you can compare policy provisions or prices at their website.

    Anita

  7. Anita,

    Thanks for the link to Plain English! Have you seen the funny TV series, Yes, Prime / Minister?

    http://www.answers.com/topic/yes-minister?initiator=1

  8. Another reason referrals get so much weight: we tend to put our trust in peers and friends.–> This is so true Anita. Peer factor is really of so much weight to us. Especially if this certain peer has the direct experience to a certain insurance or product. Of course, who wouldn’t want to know the product/service first before actually buying it for yourselves right?

  9. Richard Faulkner, Esq.

    Referrals have great credibility because they are the result of actual experiences. Whilst “coverage” explanations and exclusions are near often incomprehensible, receiving advice from peers can help make the need or lack of need of a particular coverage clear.

    Unfortunately, peer advice often does not include subtleties such as avoiding claims arbitration clauses. I have represented even large, sophisticated companies that have been horrified to learn that any disputes with their insurers over certain claims and/or coverages must be arbitrated in England or Bermuda, and at outrageous expense.

    Peer referrals are extremely useful, but should only be part of any analysis.

  10. Hey Anita,

    What stands out to me, with business insurance (property, general liability, worker’s comp, umbrella liability) and with employee benefits (health insurance, term life, disability, dental), is that small businesses state affordability as an issue.

    While intangible, risk is present the minute the business starts. Insurance must be an integral part of any start-up expense and business plan.

    Rather than a nuisance, insurance needs to be embraced by even the smallest of businesses.

    Advisory blogs need to stress, and re-stress, the reality of risk exposure and the threat of such exposure to the individuals livelihood, their families and the dreams they hold. Sole Proprietors need at least to form an LLC or S Corporation to limit personal liability!

    Just because you don’t purchase insurance, doesn’t mean that you are without risk. To the contrary, you retain the risk rather than transfer it to the insurance company.

    The survey results show that over forty percent of the respondents said that the insurance cost was too much for their business! The real and eventual peril that causes businesses to lose everything will cost far more.

    Especially in these times of staggering financial losses, it must be imperative to acknowledge and prepare for actual risk that does in fact exist. Insurance provides the prudent transfer of risk and keeps the business operating, the owner content and her dreams forever possible.

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