It seems more and more budding entrepreneurs have followed the allure of starting a home-based business, so much so that it is estimated that half of the 30 million small businesses in the U.S. are home-based.
AXIS Insurance identified these diverse business owners as an inexperienced, underserved market often relying on homeowners insurance to cover business risks. Furthermore, the insurance industry had yet to adjust to the home-based-business momentum.
“The insurance industry collectively labels small business as a singular group, and we give them the same product, the same servicing and relatively the same price points.” Jill Bryant, head of small specialty commercial at AXIS Insurance, told Insurance Journal. “But here you have this microconsumer with revenue typically under $1 million, working from home.
“There’s a gap. These are typically personal-lines insurance buyers. They don’t have very much experience purchasing commercial insurance; they do not realize the liability is theirs; and they are price-point sensitive. They don’t know what type of insurance they should buy.”
AXIS commissioned a survey of 1,000 home-business owners and found 91% know they need insurance coverage but 44% either do not have coverage or do not know what liabilities are covered by the insurance they have.
“That’s why we have created a completely new product that does not rely on the principles of policy language created by [the Insurance Services Office] in the 1970s for small businesses,” Bryant said. “These owners need unique coverage because what they do is different, and we can align coverage for a tailored insurance product.”
The survey found 24% of respondents are in e-commerce and home crafts and 16% are in professional services/consulting. Other home-based business owners said they are in construction, IT services, and food and beverage.
However, coverage within a typical homeowners policy or general liability policy may not cover risks associated with giving advice or product liability, for example.
Bryant said home-based business owners do not understand the different between general liability and professional liability. AXIS Insurance has combined the two products together if necessary to match risks.
“We wanted to create an environment of simplicity and transparency,” Bryant said. “They don’t have to be insurance experts. That’s what we do, and we can determine what they need and built it by understanding the basic principles of their business, who they’re interested in serving, and being very transparent in our product about what they have coverage for and what they do not.”
Bryant said the home-based-business trend started prior to the pandemic but was likely accelerated by the pandemic and what has come to be known as the Great Resignation. She said a shift began as millennials sought alternative work methods.
“What we found from the survey is that this is more about a cultural change – a societal change rather than an economic change,” Bryant said. “People are very passionate about what they are doing. They really love being their own boss, in control of their work-life balance.”