Mark Thomas is Founder and Director of Compare My Insurance.
SMEs are the backbone of UK private sector businesses, making up 99.9% of the business landscape at an estimated 5.5 million.
Despite this, around 80% of SMEs remain underinsured in the UK, lacking an appropriate level of financial protection.
SMEs present an attractive market segment for insurers due to higher premiums in comparison to personal insurance, and while more brokers are increasingly tailoring their offerings to this segment, far fewer are managing to address the complex needs of SMEs successfully.
Insurance needs of SMEs
SMEs generally require simpler, cheaper and tailor-made insurance solutions than their larger commercial counterparts.
This is particularly true of more complex areas of insurance, or those that are continually evolving, such as cyber security insurance products. In many cases, SMEs forgo this type of coverage due to the perceived complexities of taking out a robust policy, and this is reflected in the numbers, with only 17% of small businesses in the UK having a dedicated cyber insurance policy.
With extensive choices around the insurance products available to them, but often very limited knowledge on their own insurance needs as related to their specific industry or sector, SMEs increasingly require the human touch from their insurance brokerages, and access to ongoing support and support, extending well beyond the point of sale. This might include help with reevaluating the scope of their current policies against recent changes to the business or service areas, or valuable support during the claims process.
The role of brokers in SME insurance
With SMEs preferring to delegate insurance activities to a trusted broker, there is an increasing need for brokers to provide additional levels of customer service, and an expansion of their role beyond just intermediaries, and instead as consultants to SME clients.
Brokers that are able to add this additional value to their services through advisory and informational services are better positioned to capture more of the underinsured SME insurance market.
The commercial insurance industry overall suffers from a perceived lack of transparency, with the sector overall lagging behind other, more customer-centric insurance sectors such as health or life insurance. With a detailed understanding of the types of products on offer, as well as the market conditions impacting premiums, brokers are well-placed to advise and guide SMEs on levels of cover, risk factors affecting their premiums, and key insurance considerations relevant to the industries they operate within.
The demand for digital platforms and services
Digital brokerage platforms, as well as digital channels more widely, are already beginning to transform the way SMEs, insurers and brokers interact. While price comparison sites are available, the lack of detailed, dynamic pricing options, paired with the often-specific needs of SMEs, still make speaking to an insurance broker preferable to going it alone for many businesses.
Brokerages that can tap into this desire and leverage their digital platforms and tools to support this are at a distinct advantage. Leveraging current advances in technology through AI and automation already allows brokers to distil valuable information to their clients regarding such things as dynamic pricing options and more detailed breakdowns of how premiums are calculated. Not only does this promote better levels of transparency between clients and the insurance industry, but it also provides immensely valuable insight for business owners regarding their insurance needs and levels of cover, empowering them to make better insurance decisions where they might otherwise have opted for products that would not have fully met their requirements.
Final thoughts
Commercial insurance brokers are in a position of strength when it comes to building positive, long-term relationships with the SMEs they work with. Brokers that are able to leverage this client-centric approach through transparency, technology and a renewed focus on customer service are well placed to capture the underinsured SME insurance market through delivering better value, and providing businesses with the support they need through the entire insurance process.
