An insurer’s record on sustainability is important to small and medium sized enterprises (SMEs) in the UK but it is still the least important factor to businesses when it comes to choosing policies, and this is likely to be exacerbated by soaring inflation, according to GlobalData. The leading analytics company notes that rising inflation—at a time when many businesses are still recovering from the COVID-19 pandemic—could push the importance of sustainability further down, with financial factors becoming even more essential for small businesses.

GlobalData’s 2022 UK SME Insurance Survey reveals that SMEs claim sustainability is important to them. When the company asked SMEs to rank its importance between one and five (with one being not at all important and five being very important), 65.3% of SMEs ranked it as either four or five. This was slightly down from 67.6% in the 2021 survey. However, in the same survey, when SMEs were asked to rank a range of factors in terms of their importance when choosing an insurer, sustainability was most often placed last out of a list of 10 factors.

The figure below shows the percentage of respondents who ranked sustainability as the two lowest factors in terms of importance (from a list of 10 factors).

There was a 7.4 percentage point difference between SMEs who ranked sustainability ninth and 10th, which was the single biggest gap between rankings. Factors placed above sustainability by SMEs included cost of policy (which 25.0% of respondents placed in first), the reputation of the insurer (12.1% first place ranks), and transparency of pricing (11.6% first place ranks).

The figure below shows the percentage of respondents who ranked sustainability as the highest factor in terms of importance (from a list of 10 factors).

The percentage of SMEs that ranked sustainability as first, second and fourth most important decreased by 1.8 percentage points, which shows that the factors around finances have become even more important.

Ben Carey-Evans, Senior Insurance Analyst at GlobalData, comments: “Sustainability is a growing trend in the industry, with insurance brokers Marsh McLennan and Lockton both walking away from a coal mining operation in Australia in September 2022. Yet, high inflation and cost-of-living crises around the world—as well as businesses still recovering from COVID-19—will make factors around price, pay-outs, and trust even more important. This is likely to explain businesses being slightly less concerned about sustainability in 2022 compared to 2021.

“Overall, it is clear that sustainability remains a key issue for businesses. Even though this has not yet translated into it being a key factor when choosing policies, it is something insurers need to be increasingly aware of.”