When the going gets tough for SMEs, the insurance industry should get going.

Since the pandemic began to wreak havoc on the UK’s economy, millions of SMEs have become much more interested in their insurance cover. Not only are a third of them now paying much closer attention to their policies, but the same proportion report that they would be willing to pay 10% more in premiums in order to get additional specific protections.
And, in what seems to be emerging as a new rule of 33%, a third of SMEs state that they would be ready to pay more for pandemic coverage.

Clearly there is an opportunity here for brokers and insurers to step up in delivering value for customers, double down on small business coverage and satisfy this surging demand for targeted protection.

The UK’s 5.9 million SMEs are the lifeblood of the UK economy – last year they employed 16.6 million people and generated £2.2 trillion in turnover (DBEIS) – but they have been among the hardest hit by the pandemic since March.

With a second wave of the virus resulting in further lockdowns across the UK, many are battling to stay afloat as their financial position becomes increasingly precarious and trading conditions remain dismal.

Insight one: Desire for clarity on cover

In these distressed circumstances, it is not surprising that SMEs want to get clarity on precisely what they are, and are not, covered for.  In addition, they are keen to get a better understanding of what options they have and don’t have in terms of future protection.

The grim experiences of the last months have given SMEs a heightened level of sensitivity about future risks that may impact their business. This is accompanied by the realisation that they may no longer have the financial cushion to absorb any additional setbacks.

Many are reconsidering their previously cost-focused view of insurance as a grudge purchase: instead they are taking a keener interest in what is included and excluded on their policies. They also want to get a better understanding of the balance between their risk exposure and the coverage they have in place.

Insight two: Willingness to pay more to get more

That desire is reflected in the risk categories where they indicate that they would be willing to pay more. As well as the dedicated pandemic coverage mentioned earlier, more than one in five would pay more for protection from financial interruption while 17% would pay added premiums to guard against professional failure.
The painful experiences of COVID-19 disruption are discernible in these responses. That also holds true for those who cited reputation damage and employment practices as categories where they could see the benefit of increasing their premiums for more comprehensive coverage.

Insight three: Advantages of affiliation
The shifting perspective of SMEs is not just confined to policy cover. The pandemic experience is also informing their views on distribution channels as well. It’s clear that, in times of uncertainty, SMEs are looking for trusted guidance: 60% of respondents stated a preference for sourcing insurance from a provider that has an affiliation to a relevant trade body. This third-party endorsement has considerable value: the trade body is effectively rubber stamping and validating their choice gives added confidence in the product.

Insight four: Keen interest in flexible cover
Agility and flexibility are also now much more front-of-mind for the SME sector. Nearly half of companies (46%) want policies that allow them to adjust coverage easily to match the varying level of protection they need throughout the year. The pandemic has made businesses realise they need to react quickly to changes in circumstances such as being a restaurant that now operates as a takeaway food outlet or a call centre that now has all staff working remotely.

Insight five: Demand for bundles that go beyond core insurance

An even greater number (55%) have expressed interested in having non-insurance services bundled with their policy. In the current period of social and financial upheaval – which has affected all types of business, in every sector, right across the UK – SMEs are looking for advice on how to survive the devastation. They trust their insurers and are keen to leverage that valued relationship beyond policy cover and into support with other business issues.

Legal advice emerges as the most in-demand service with 34% of SMEs interested in sourcing this from their insurer or broker. One in six are interested in tax assistance, financial assistance and IT set up and support.

Conclusion: Pivot to pro-active
There are clearly genuine opportunities for insurers and brokers to strengthen and deepen the SME customer experience by positioning themselves as trusted business advisers who offer dynamic, tailored and flexible cover along with holistic business services that anticipate and satisfy customer needs.

The clear ask from the SME sector is to engage with providers who are proactively customer-centric rather than reactively product-centric. Those insurers and brokers who have the answers stand to thrive.

In next weeks final blog post, we will explore what the future could like for SME in how insurers and brokers could support them beyond traditional insurance coverage.

Get in touch to find out how your organisation can thrive in the post-pandemic SME insurance marketplace