This is the 10th year of the Vero SME Insurance Index and the insurer has highlighted some long-term trends, as well as reflections from small to medium businesses on their risks and insurance during 2020, including adjustments to of their insurance cover in response to the pandemic. Here we review some of the key findings.The index is based on a national survey of 1500 business owners and insurance decision makers of SMEs from micro to medium businesses with <200 employees. The research canvassed attitudes to, among a number of topics, using a broker versus buying direct, service levels and broker engagement, claims experience and cost of premiums/perceived value for money.
Lowered confidence in business prospects over the year ahead
Not surprisingly uncertainty about the future has increased since last year’s survey. Business owners who say they don’t feed confident have more than doubled from 9% in 2020 to 21% in 2021, of most concern is not increasing cost as usual, but the risk of economic downturn Interestingly, ‘feeling confident’ remains for about 50%, the same as previously.
Shifts towards obtaining insurance through a broker
For many business owners the uncertain conditions have prompted a switch from buying insurance direct to using a broker, with 40% of SMEs saying they purchased their last policy through a broker, up from 35% in 2020. Underlining this, more than half of direct buyers are considering using a broker in future (up from 41% in 2019 to 54% in 2021).
54% of direct buyers are considering using a broker in future.
SME satisfaction corresponds with broker interaction
Falling business confidence has also raised appreciation of how brokers can add value to the process of selecting appropriate business insurance policies and wordings, with satisfaction levels positively linked to the types of tasks that brokers do for their clients.
Respondents rated value adding activities such as providing in-depth analysis and information, checking on how the insured business or relevant regulations may have changed, advocating on their behalf and providing options on costs.
Over the last few years service has become the most common reason many clients work with their current broker. Service is now regarded as being just as important as expertise.
Increasing business independence in decision making
Over the past 10 years business owners have become more interested in active decision making about insurance, based on their own predominantly online research, with 60% of today’s SMEs personally researching the insurance needs of their business before buying cover.
However, broker involvement proved to be an important factor in satisfaction. Specifically 51% of SMEs who have a collaborative relationship with their broker, in which the broker presents them with insurance cover choices and then they decide together, are highly satisfied, scoring their broker 9 or 10 out of 10, compared to only 24% of those who report minimal interaction with their broker.
72% of broker clients who made a claim were satisfied with the process.
Claims experience critical to perceived value of cover
Making a claim is often a moment of truth for insured business owners and is a key value add, reported that broker involvement makes a substantial difference. According to 2021 data 72% of broker clients who made a claim were satisfied with the process, compared to only 37% of direct claimants.
Broker involvement ranges from managing the entire claims process to providing guidance while the client manages the process (split fairly evenly at 45% and 48%) but in both cases clients feel the experience is less complex.
Business owners’ attitudes to premium costs
The majority of business owners are expecting premium increases and are most likely to attribute the reason to the effects of COVID-19 or inflation, disregarding the impact on claims of natural disasters such as fires or floods.
Wariness and desire to obtain the cheapest deal are very strong (73% each) drivers of attitudes to insurance, with 82% of respondents admitting to being ‘grudge’ buyers who take out (minimum) insurance in order to meet compliance requirements. These proportions are approximately 10% higher than in 2015.
While many respondents intend to keep their current insurance cover in place, about a third have made moderate reductions - more typically larger SMEs, newer businesses and those industries which have been more negatively impacted by the pandemic. Of concern, only a small proportion (17%) expressed awareness that these insurance reductions might lead to them being under insured, and an alarming 30% had not considered the impact on their protection.
The exposure of underinsurance is a strong reason for interacting with a broker who can help to demystify how premium costs are calculated and explain the technical aspects of how insurance cover provides protection.
How risk and insurance experts can help
Talk to one of our business insurance specialists to learn more about how we can help you with your SME’s needs.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.
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