The UK small and medium-sized enterprises (SME) insurance market has continued to grow in light of a growing economy which has facilitated increases in the number of SMEs and consequently the opportunity to sell commercial insurance, says research and consulting firm GlobalData.
According to the company’s latest report, micro enterprises (businesses with 0 to 9 employees) have driven the rise in the number of SMEs according to the Department for Business, Energy & Industrial Strategy. Considering that micro enterprises account for 95.5% of all UK SMEs in the private sector, and that according to our 2016 UK SME Insurance Survey almost a third (29.1%) of micro-enterprises do not hold commercial insurance, this sub-segment is a growth prospect for insurers.
Danielle Cripps, Financial Analyst at GlobalData, explains: “With a growing number of SMEs in the UK, there is greater opportunity to sell commercial insurance, especially within the micro segment of businesses. 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 critical. Smaller companies perceive themselves to be at less risk and thus less in need of insurance. Smaller businesses also have lower budgets to spend on insurance and less experience purchasing insurance.
Cripps continues: “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.
“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. GlobalData believes increasing penetration and tackling underinsurance is therefore key moving forward.”
- Information based on GlobalData’s report: UK SME Insurance: Market Dynamics and Opportunities 2016