Insurers are failing UK Small- and Medium-sized Enterprises (SMEs), according to a new report by the Boston Consulting Group (BCG).
The report indicated that over one third of UK SMEs were unaware of who their insurer was.
The BCG compiled its global report into SME commercial insurance trends after carrying out a survey of 2,500 SMEs in six of the largest developed insurance markets – France, Germany, Italy, Japan, the UK and the US.
In the UK, SMEs account for 99 per cent of private sector companies, and contribute 49 per cent of that sector’s total turnover. The SME insurance market in the UK is worth £7bn, and the primary distribution channel is made up of independent agents, which are not directly owned by insurers. Just 18 per cent of small businesses purchase their cover directly from insurers.
According to the BCG, its research identified SMEs’ four main “needs and preferences”. The study revealed that while SMEs in general expressed satisfaction with their broker and agent relationships, they also stated that they would like more proactive engagement from their insurers. It also showed that SMEs place greater trust and loyalty in incumbent insurers with captive agents. In addition, the BCG found that SMEs “apply little consumerism” to their insurance purchasing decisions, with many companies switching carriers for better coverage as opposed to a lower price.
Finally, the study claimed that SMEs in developed markets were reluctant to use banks as insurance intermediaries, as they did not believe banks had sufficient expertise in the field
The BCG stated: “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.”