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United Kingdom (UK) SME Insurance Market Dynamics, Challenges, Growth Opportunities and Forecast, 2022-2026

Pages: 45 Published: March 08, 2023 Report Code: GDFS0426IA

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United Kingdom (UK) SME Insurance Market Dynamics

The gross written premium (GWP) in the UK SME insurance market was valued at GBP10.5 billion in 2021 and is expected to grow at a CAGR of more than 2% during 2021-2026. The primary factor contributing to GWP growth was a large year-round hardening of premiums. Many insurance lines experienced significant increase in the cost of repayments due to inflation and issues with the global supply chain, which led insurers to raise premiums, particularly property and cyber insurance premium prices. Penetration rates across most product lines increased when compared to 2020, allowing insurers to grow the volume of policies sold. This was despite the number of SMEs declining in 2021.

The UK SME insurance market research report analyzes the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy. The report will help to identify the effects of the cost-of-living crisis on the UK SME insurance space.

UK SME Insurance Market Outlook 2021-2026 (GBP Billion)

UK SME Insurance Market Outlook 2021-2026 (GBP Billion)

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UK SME Insurance Market Dynamics

The rising cost of living is also affecting consumer purchasing power, which has a significant knock-on effect on any consumer-facing SME. The economy bounced back from the COVID-19 pandemic in 2021 as lockdowns ended during H2 and the country returned to a form of normality. This allowed most SMEs to operate fully again. However, many SMEs may have faced staffing issues due to the lasting impacts of COVID-19 and Brexit.

Insurers should focus on communicating and providing support to clients that are struggling with the UK’s challenging business environment. However, insurers face the risk of declining penetration rates as SME numbers continue to fall and businesses cut expenditures due to tight budgets. For this purpose, insurers may need to innovate to counteract a rise in cancellations.

UK SME Insurance Market Segmentation (Based on Size of SMEs)

The key UK SME insurance market is classified into the medium SME, small SME, micro-SME, and sole trader. Medium SMEs led the UK SME insurance market in 2022. In 2022, around 70% of small- and medium-sized businesses purchased packaged insurance.

Packaged insurance plans (whereby several insurance policies are purchased from the same insurer or broker) are a significant component of the product landscape in the SME market. The more complicated an organization’s insurance needs are, the more likely it will require multiple types of insurance coverage.

Percentage Of SMEs That Bought Insurance Via a Package by Size of Business, 2021-2022

Percentage Of SMEs That Bought Insurance Via a Package by Size of Business, 2021-2022

For more insights into the UK SME insurance market segments, download a free report sample

UK SME Insurance Market – Growth Opportunities

Insurers will have to deal with a shrinking SME market in terms of the number of businesses, with rise in liquidation since the onset of the COVID-19 pandemic. Furthermore, the expected recession will undoubtedly cause more businesses to close, which will put pressure on the value of premiums in 2023. The business must reduce expenses to ensure they can survive the recession, given the growing concerns about the ongoing cost-of-living crisis.

The prospective client base for insurers will continue to shrink soon due to the falling number of SMEs in the UK, which will put more pressure on providers to raise prices. However, there is only little growth insurers can achieve by raising premiums further.

UK SME Insurance Market Report Overview

GWP (2021) GBP10.5 billion
CAGR (2021-2026) >2%
Forecast Period 2022-2026
Key Segments Medium SME, Small SME, Micro SME, and Sole Trader

Key Highlights

  • Learn about the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy.

  • Identify the effects of the cost-of-living crisis on the UK SME insurance space.

  • Discover GlobalData’s forecasts for the market.

  • Recognize the challenges faced by UK SMEs.

  • Identify growth opportunities in the SME market.

Reasons to Buy

  • Learn about the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy.

  • Identify the effects of the cost-of-living crisis on the UK SME insurance space.

  • Discover GlobalData’s forecasts for the market.

  • Recognize the challenges faced by UK SMEs.

  • Identify growth opportunities in the SME market.

Key Players

Aviva
Deliveroo
Zego

Table of Contents

  • 1. Executive Summary

    • 1.1. Claims inflation has led to steady premium growth

    • 1.2. Key findings

    • 1.3. Critical success factors

  • 2. The Shape of the UK SME Market

    • 2.1. Introduction

    • 2.2. SMEs account for the vast majority of UK businesses

    • 2.3. Macroeconomic impact on the SME market

    • 2.4. UK GDP growth has been sluggish since Q1 2022

    • 2.5. The cost-of-living crisis is a huge concern for SMEs

  • 3. The UK SME Insurance Market

    • 3.1. The SME insurance market registered steady growth in 2021

    • 3.2. Packaged insurance plans are common, especially among small- and medium-sized businesses

    • 3.3. COVID-19 cancellations have fallen as SMEs return towards normalcy

    • 3.4. Employers’ liability take-up increased in 2022, although it remains low given that the product is a legal requirement

    • 3.5. Insurers should offer usage-based policies to help SMEs maintain their cover

    • 3.6. Penetration rates fluctuate across lines, but on the whole key products have increased

    • 3.7. Larger SMEs are more likely to have most types of insurance

  • 4. The Future of the UK SME Insurance Market

    • 4.1. SME GWP is set to rise steadily to GBP12.1 billion by 2026f

  • 5. Appendix

    • 5.1. Abbreviations and acronyms

    • 5.2. Definitions

    • 5.3. Methodology

    • 5.4. Secondary sources

    • 5.5. Further reading

  • 6. About GlobalData

  • 7. Contact Us

List of Tables

Table 1: The number of SMEs in the UK private sector by business size, 2011–22

Table 2: UK private enterprise volume, employment, employees, and turnover by business size as of the start of 2022

Table 3: The number of company registrations in the UK (000s), 2016–23

Table 4: Policy cancellations because of COVID-19 by products and SME size, 2022

Table 5: Product uptake among UK SMEs, 2018–22

List of Figures

Figure 1: Most UK private enterprises are SMEs, but they only account for just over half of turnover

Figure 2: Company liquidations rose again in 2022

Figure 3: Three of the 16 industries account for more than half of SME revenue

Figure 4: Over three quarters of SMEs are concerned about the cost-of-living crisis

Figure 5: Only one in five employees anticipate being in the office for more than three days a week

Figure 6: Since the COVID-19 pandemic began, the UK’s GDP has experienced significant fluctuations

Figure 7: In April 2020, the number of people receiving Universal Credit significantly increased

Figure 8: The UK unemployment rate continued to fall in 2022

Figure 9: Since the beginning of the COVID-19 pandemic, total and real earnings have fluctuated

Figure 10: SMEs are concerned about being financially affected by market and economic conditions

Figure 11: Over three quarters of businesses in the IT and business services sector are concerned about generating enough revenue to stay afloat

Figure 12: Over two thirds of the transport, storage, and communication sector are concerned about a situation that would prevent them from trading

Figure 13: The SME insurance market experienced steady growth in 2021

Figure 14: Cyber, property, and business interruption insurance all saw premiums rise at renewal in 2022

Figure 15: Since the COVID-19 pandemic, major commercial insurance lines have experienced fluctuations

Figure 16: In 2022, around 70% of small- and medium-sized businesses purchased packaged insurance

Figure 17: The biggest proportion of cancellations resulting from COVID-19 were seen in commercial motor products in 2022

Figure 18: Some SMEs are not aware employers’ liability is a legal requirement

Figure 19: A fifth of SMEs that do not have usage-based insurance are receptive to the idea

Figure 20: Around three quarters of SMEs would be interested in usage-based car insurance if it reduced their premiums

Figure 21: SMEs view cheaper premiums and improved safety measures as the most important features of usage-based car insurance

Figure 22: Insurers have experienced varying degrees of success with product penetration

Figure 23: Penetration rates rise in line with company size

Figure 24: SME market GWP is set to reach GBP12.1 billion by 2026f

Figure 25: 2022 saw a significant rise in the number of remote workers among SMEs

Figure 26: SMEs are aware that the COVID-19 pandemic increased their cyber risk

Figure 27: SMEs are more likely to buy cyber insurance following the impact of the COVID-19 pandemic

Figure 28: Larger SMEs are more willing to pay for pandemic insurance

Figure 29: Larger SMEs are prepared to spend more on pandemic insurance

Figure 30: Forecasting methodology

Frequently Asked Questions

The UK SME insurance GWP was valued at GBP10.5 billion in 2021.

The UK SME insurance market is expected to grow at a CAGR of more than 2% during 2021-2026.

The key UK SME insurance market is classified into medium SME, small SME, micro-SME, and sole trader.

Medium SMEs led the UK SME insurance market in 2022.
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