Vero Insurance NZ Ltd is holding brokers in high regard for their role and the great opportunity they have in helping address underinsurance in the world of small- and medium-sized enterprises (SMEs) in New Zealand.
“With the impact of inflation and the rising cost-of-living, there’s potential that some SMEs may look to reduce their insurance to save costs without realising the potential impacts this could have on their lives and business,” Vero executive manager for business Chris Brophy (pictured) told Insurance Business.
“The risk of being underinsured is great here, and the value brokers provide in this instance is very valuable. A good broker will understand the SME’s situation and the insurance products that best suit to ensure the SME remains adequately insured.”
The statement comes following the release of preliminary findings from a special edition of Vero’s SME Insurance Index, which examined key insights in relation to COVID-19. It was found that a mere 10% of broker SME clients have adjusted their insurance coverage despite high levels of business changes, and that 77% have not talked to their broker about the impact of the pandemic.
Brophy noted: “The past few years have been challenging for many in the industry, and it’s the same for SMEs. Insurance may not have been top of mind for SMEs as they’ve been busy adjusting and pivoting their business due to COVID-19.
“This research suggests that the SMEs surveyed might not really understand how the changes they’ve made to their business could affect their insurance cover, which could potentially mean under- or over-insurance. This may provide an opportunity for brokers to reach out and check in with customers that their unique insurance needs are covered.”
Whose onus is it, though – that of the policyholder to update the intermediary, or is it more the broker’s duty to find out whether or not the SME has made changes that might also require cover adjustments? For the executive manager, it’s a mutual undertaking.
“These research findings suggest there is an opportunity for both SMEs and brokers, if they haven’t already, to check in with one another to understand if any business changes due to COVID-19 may affect insurance cover,” declared Brophy. “This may also provide an opportunity for brokers to emphasise their value by providing their expertise and giving SMEs the confidence that they are adequately insured for their specific needs.”
According to the latest Vero SME Insurance Index, small businesses are most concerned about the long-term impact of COVID-19 on the economy (37%), followed by the threat of an economic downturn (29%). Other major concerns include being unable to trade for a long period of time (25%); regulatory or legislative change (also 25%); supply chain disruption (23%); and maintaining COVID-safe practices (21%).
Meanwhile a fifth of the polled SMEs also cited mental health among their top concerns, along with ensuring customers and employees are vaccinated (19%). Also seen as challenges are attracting and retaining good staff (13%) and employee safety or avoiding workplace accidents (12%).
“With so much on their minds,” Brophy told Insurance Business, “the value a broker can provide through sharing their knowledge, highlighting their expertise, and really getting to know their customers’ business, while potentially also saving the SME time – for SMEs this is a value-add opportunity.”
During the pandemic, Kiwi SMEs have had to rely the most on government subsidies, cost reductions, and changing the way of working to stay operational. Applying for government assistance programmes, for instance, was consistently on top in all three years – 44% in 2020; 37%, 2021; and 43%, 2022.
Other tweaks include changing how the business trades, changing the business product or service focus, and closing the business temporarily.
“While these changes were needed to keep businesses running, the question is whether they were made in conjunction with changes to insurance policies,” asserted Vero, which has financial hardship support options for qualifying customers to help them stay insured. “Brokers could take this opportunity to check in with SMEs to see if changes made to business operations are permanent and thus correctly reflected in their cover.
“While it’s promising to see 15% of SMEs have increased their cover, it’s concerning to see 20% have decreased their cover and 19% have reduced the number of things covered. The changes might be a true reflection of the ‘new normal’ business operation, but that may not be the case for all.”
Notably, Vero’s new poll – conducted among 638 owners and decision-makers from around NZ – found that 7% of the surveyed SMEs have gone without business insurance while 6% have moved to direct insurance.
“Rather than presenting a challenge, we think this provides a great opportunity [for brokers] as we know that SMEs value a broker and their expertise,” said Brophy.
