The growth of the small and medium enterprise (SME) market in the UK has prompted a surge in opportunities to sell commercial insurance. However, it seems the most significant group of SMEs is still taking the risk of doing business without significant cover in place.
According to the Department for Business, Energy & Industrial Strategy, micro enterprises – that’s businesses with zero to nine employees - have driven the rise in the number of SMEs. However, while micro enterprises account for 95.5% of all UK SMEs in the private sector, Verdict Financial’s 2016 UK SME Insurance Survey found that almost a third (29.1%) of micro-enterprises do not hold commercial insurance, making it a serious growth prospect for insurers.
“With a growing number of SMEs in the UK, there is greater opportunity to sell commercial insurance, especially within the micro segment of businesses,” explained Danielle Cripps, analyst at Verdict Financial.
“In order to reach the large volume of SMEs, commercial insurers should focus on delivering fast-flow and commoditized products. This strategy is important to lower the operational costs associated with distributing a high volume of smaller risk products.”
Improving product penetration and reducing underinsurance for SMEs is also seen as critical. Smaller companies often perceive themselves to be at less risk and thus less in need of insurance while also having lower budgets to spend on insurance and less experience purchasing insurance.
“Brokers and insurers should aim to educate SMEs about the range of commercial products available, and why they are a worthwhile purchase, in order to increase penetration and reduce underinsurance to grow their commercial books,” continued Cripps.
“Businesses of all sizes require insurance, and SMEs could be argued to be most in need of insurance as they have the fewest resources and least capacity to recover from financial losses.”
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