A third of SMEs do not even know who their insurer is, and the industry is failing to appeal to the sector’s needs and preferences, according to a new report by the Boston Consulting Group (BCG).
SMEs make up 99% of privately owned companies in the UK and the insurance market for this sector is worth £7 billion, but less than a fifth buy cover direct from insurers – most use independent agents as intermediaries. However, the BCG research found that the majority of SMEs would prefer more proactive engagement from insurers.
SME respondents in developed markets also reported having a reluctance to use banks as insurance intermediaries as they doubt the expertise of banks in this field, preferring to use incumbent insurers with captive agents. The report also found that cost was a lesser consideration for SMEs than broad coverage.
To better appeal to SMEs, the report suggests that insurers do not try and supplant the trust relationships that smaller businesses have with insurance agents, but instead explore outreach options that do not interfere with the existing arrangements they have with intermediaries. It also recommends that they actively work on increasing their value proposition for these intermediaries by breaking down insurance offerings in a way that agents can identify and sell the most appropriate options to clients.
Commenting on their findings, the BCG said: “In an era of tight margins and weak returns for commercial insurers, small businesses offer a substantial and rewarding growth market. Carriers that succeed will be those capable of rethinking the market, the SME customer, and perhaps even their own business model.”