UK SME Insurance: Distribution Dynamics 2016

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Verdict Financial’s “UK SME Insurance: Distribution Dynamics 2016” report looks at how SMEs buy insurance coverage and the reasons behind their purchasing decisions. This report also examines the services SMEs are currently receiving and the additional amenities they would like from their provider going forward. Other influential factors on the market are also taken into consideration, such as the location of the business (home or on-site/office), or the age of the business owner.


The SME market is important for commercial insurers as SMEs account for the majority of the UK economy. With insurers increasingly targeting the segment, the market is very competitive and propositions are evolving to cater for small and medium-sized enterprises (SMEs). E-trade, via a broker, is becoming more of a central focus for the insurers in this space, as is the distribution of high-volume, low-value business via the direct channel.

There has been an unmistakable growth in focus on direct-to-SME insurance propositions over previous years, but 2016 has seen brokers fight back. Direct insurers continue to enjoy a significant share of commercial business but brokers are beginning to follow suit in terms of the propositions they’re offering. Increasingly they are striving to promote a more streamlined offering online, as well as maintaining their advice-led services. Brokers driving the resurge are those that have applied their high-volume online personal lines capabilities to the commercial sector, such as Tower gate and Swinton.

The benefits of the direct channel continue to be long-term customer ownership and a fast-flowing distribution chain, enticing the smallest businesses to purchase conveniently online, akin to how their personal insurance is bought. While this is the battleground for micro enterprises, for larger businesses the demand sits towards the other end of the spectrum; a desire for a wider range of services and deeper relationships where capacity from providers is perhaps not being provided to them. Nevertheless, brokers are beginning to cater to customers residing at both ends of the scale, sparking stiff competition between the two channels, a duel which is likely to intensify in the coming 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.

Direct Line
Trade Direct
Bond Lovis
and Aviva

Table of Contents


Brokers are regaining their grip on commercial insurance distribution

Key findings

Critical success factors



Brokers are starting to regain their foothold of product distribution for SMEs

2016 has seen brokers increase their share of product distribution

The direct channel has the most potential, particularly at the micro end of the market

Banks are also beginning to recognize the potential benefits of cross selling

Brokers and the direct channel compete intensely for business in the micro space

Purchasing confusion, seen in personal lines, is growing within the SME market

Insurers need a varied approach to product distribution in the SME markets

Price is the leading reason for SMEs choosing their selected distribution channel

Almost one third of home-based business owners go direct

Packaged products are popular although standalone policies are also highly sought after

Arranging insurance online is most suitable for SMEs

Most SMEs are opting to purchase cover via the internet

The online marketplace appeals to younger/more tech-savvy business owners

Contacting an existing provider is the most common action among SMEs looking to purchase

SMEs still exercise some degree of independence in the purchasing journey

There is ample opportunity to keep existing customers but many seek professional advice

Comparison sites are a popular point of referral for SMEs renewing a policy

The internet is the most popular source of information during pre-purchase activity


Remaining loyal to an existing provider is commonplace in the SME market

Over three quarters of SMEs remain with their chosen provider in most product areas

Price is the most pertinent issue when it comes to switching

Almost half of SMEs switch based on price

More businesses are expected to flock to the direct channel in the coming years

Brokers are still holding their own among expedience- and efficiency-seeking SMEs


Additional guidance from a provider or external party is important

The online tracking of claims is most important to SMEs

Simplicity is key for SMEs in the age of speed and immediacy

18.5% of SMEs regard online claim tracking as the most critical service

SMEs struggle to understand cover for alternative commercial vehicles

Nearly one in five find other commercial motor fleet products difficult to understand

Employee benefit advice continues to be highly sought after

Legal advice is the most common added-value service held by SMEs

Advice around employee benefits remains the most unfulfilled additional service


Price remains the deciding factor for SMEs opting for the broker channel

SMEs' choice of broker is driven by price and complex cover needs

Businesses of a smaller stature have more contact with their broker

Almost two thirds of micro enterprises only speak with their broker at policy purchase

The value SMEs attach to brokers varies by the size of the business


2015 advertising expenditure increased by almost 10% year-on-year

Direct Line still accounts for the majority of business insurance advertising spend







Verdict Financial's 2016 UK SME Insurance Survey

Further reading

About Verdict Financial


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