UK SME Insurance: Distribution Dynamics 2018

"UK SME Insurance: Distribution Dynamics 2018", report looks at how SMEs buy insurance coverage and the reasons behind their purchasing decisions. It also examines the services SMEs are currently receiving and the additional services they would like from their provider going forward. Other influential factors on the market are taken into consideration, such as the location of the business (home or on-site/office), the age of the business owner, and the age of the business.

Brokers remain the most utilized channel among SMEs purchasing insurance, yet their share of the market suffered a decline in 2018 for the second year running, according to our 2018 UK SME Insurance Survey. SMEs have begun to purchase their insurance products via a number of different channels, with price comparison sites making gains and banks re-emerging as a channel over the past couple of years. Purchasing directly from the insurer saw a surprising fall in 2018 following consistent growth, but it remains a key channel, especially for smaller SMEs. Insurance companies also continue to provide an increasing variety of products that cater more specifically for the smallest of SMEs. Given that businesses of this size represent the majority of SMEs by number, the growth of non-brokered purchasing channels is unsurprising.

Scope

- Loyalty is high, with auto-renewal being the leading method of purchasing insurance (41.8% of respondents).

- Renewal rates in commercial insurance are significantly higher than in personal lines. Over 80% of SMEs either auto-renewed at the renewal point or remained with their insurer after comparing prices.

- Younger businesses are embracing technology when purchasing their insurance, with the use of tablets and smartphones highest among businesses that have operated for less than two years.

Reasons to buy

- Identify the most prominent sales channel for SMEs.

- Adapt/re-evaluate your distribution strategy and proposition to meet the needs of modern consumers.

- Discover the factors influencing SME purchasing decisions and distribution channel selection.

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY 1

1.1. Market summary 1

1.2. Key findings 1

1.3. Critical success factors 1

2. THE ...

Table of Contents

1. EXECUTIVE SUMMARY 1

1.1. Market summary 1

1.2. Key findings 1

1.3. Critical success factors 1

2. THE SME PURCHASING JOURNEY 7

2.1. Introduction 7

2.1.1. SMEs make up the backbone of the UK economy 7

2.2. Price comparison sites and banks challenge brokers’ dominance 7

2.2.1. Broker popularity increases as the size of the business grows 9

2.2.2. Micro businesses are moving from the direct channel to comparison websites 10

2.2.3. Small businesses moved from the direct channel to price comparison sites and banks in 2018 12

2.2.4. The bancassurance channel is strongest among medium-sized businesses 15

2.2.5. SMEs predominantly auto-renew policies across all business sizes 16

2.2.6. Young companies are embracing the use of technology 18

2.2.7. Face-to-face purchasing increases in popularity in line with the age of the business 19

2.3. SME pre-purchase activity shows a retention-heavy market 20

2.3.1. SMEs’ primary action at renewal is to call their existing providers 20

2.3.2. A significant percentage of SMEs conduct research on price comparison sites 21

3. SME RETENTION 24

3.1. Larger businesses are more likely to renew their existing policies 24

3.2. Sole traders compare prices at renewal, but rarely change 25

3.3. Micro enterprises (excluding sole traders) have a high retention rate 27

3.4. Small enterprises are more likely to auto-renew than compare prices 28

3.5. Medium enterprises show a high degree of loyalty to providers 30

4. SERVICES PROVIDED BY INSURERS 34

4.1. A simple policy explanation is essential, but larger SMEs prioritize full pay-outs 34

4.2. The most common added-value service used by SMEs is legal advice 38

4.2.1. Openness to receiving services is dependent on SME size 40

5. APPENDIX 43

5.1. Definitions 43

5.1.1. SME 43

5.2. Methodology 44

5.2.1. GlobalData’s 2018 UK SME Insurance Survey 44

5.3. Further reading 44

List of Tables

List of Tables

Table 1: Method of purchasing insurance by SME size category, 2018 18

Table 2: SME pre-purchase activity by category size, 2018 23 ...

List of Tables

Table 1: Method of purchasing insurance by SME size category, 2018 18

Table 2: SME pre-purchase activity by category size, 2018 23

Table 3: The actions undertaken by SMEs at the time of renewal, 2018 33

Table 4: Insurance services most valued by SMEs, 2018 38

Table 5: The percentage of SMEs receiving additional services, 2018 40

List of Figures

List of Figures

Figure 1: Banks and PCWs pick up broker and direct business in 2018 8

Figure 2: The dominance of brokers increases with ...

List of Figures

Figure 1: Banks and PCWs pick up broker and direct business in 2018 8

Figure 2: The dominance of brokers increases with the size of the company 9

Figure 3: Micro insurers have been veering away from brokers in recent years 10

Figure 4: Brokers are losing share in the sole trader market but remain a leading player in the majority of lines 11

Figure 5: Micro businesses (excluding sole traders) prefer the broker channel in 13 out of 16 products 12

Figure 6: Brokers bounce back in the small business category 13

Figure 7: The broker channel remains dominant among small businesses 14

Figure 8: Brokers remain dominant among medium enterprises, but their gradual annual decline continues 15

Figure 9: Medium-sized businesses prefer brokers for every product, but other channels are emerging 16

Figure 10: Auto renewal is the most popular for all size categories 17

Figure 11: Businesses are more likely to switch, and use online methods, in the first couple of years of operation 19

Figure 12: Auto-renewal leads the way for established businesses 20

Figure 13: Contacting existing providers remains the most common action 21

Figure 14: Larger businesses are more likely to renew their insurance policies 25

Figure 15: Comfortably over 50% of sole traders stay loyal to insurers in every product line 26

Figure 16: Vehicle-based lines are most at risk of sole trader customers switching 26

Figure 17: An average of 74% of micro businesses (minus sole traders) renew policies 27

Figure 18: Micro businesses are unlikely to switch public and employers’ liability policies 28

Figure 19: On average, 82% of small enterprises renew policies 29

Figure 20: Small businesses are most likely to switch in the more common property and single motor lines 30

Figure 21: An average of 82% of medium businesses also renew, but a higher proportion do it automatically 31

Figure 22: Switching rates are lower among medium businesses, with vehicle-based products still the most likely 32

Figure 23: Micro insurers require ease of understanding and transparency 35

Figure 24: Smaller businesses focus on prompt and full payouts from insurers 36

Figure 25: Medium businesses are more concerned about receiving full payouts than prompt ones 37

Figure 26: Legal advice remains the most used add-on 39

Figure 27: Roughly three quarters of medium-sized businesses value all categories of add-on services 41

Figure 28: Sole traders have less demand for add-on services 42

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