Business Insurance And The Switch To Digital Operations With SMEs

A prominent insurance company recently conducted an extensive poll of SMEs (2017) and found that of 1200 businesses, just 336 of them had a business owners policy in place. Even fewer businesses had professional liability insurance, at just 252 businesses. That an estimated 70%+ of SMEs are without either policy is cause for concern. Among those polled, many SME owners claim that they simply can’t afford the necessary coverage to guard against perils. 

Unfortunately, industry analysis suggests that the costs of annual premiums pale in comparison to the costs of having no coverage. Business insurance costs vary considerably, and account for all sorts of business liabilities. Personal liability coverage will not necessarily protect against perils, and business owners may require additional insurance such as liability coverage, property coverage, automobile coverage, and general business coverage. 

The SME insurance market displayed interesting trends in 2018.  An extensive research report was concluded in September 2018, covering the top global insurance players across the US, Europe, China, Japan, Southeast Asia and India. The report segmented the market into various sub-categories, including size and application. PwC insights reveal that SMEs make up 99% of all businesses, and 70% of all employment activity. In OECD countries, SMEs account for 50% - 60% of value-added activity. In the UK alone, SMEs are growing at a steady clip of approximately 97,000 new businesses annually. 

The business insurance industry has a large market to tap into by targeting all of these SMEs. For starters, there is much greater profit potential with SMEs than personal insurance has to offer. However, the increasing complexity of SMEs is a major bugbear to contend with. For the most part, business insurance coverage necessitates the use of brokers and agents. From one perspective, SMEs are unwilling to shoulder the burden of higher premiums. The use of brokerage firms comes with much higher attendant costs and this is seen as a major bugbear to small business owners.

To better understand the exigencies of these small business owners, a PwC member company conducted in-depth analysis of their specific needs. 2100 SMEs were polled (each comprising a minimum of 50 employees). The result of the analysis revealed that digital insurance services are a viable solution to mitigate the costs of higher traditional business insurance coverage premiums. The findings of the Global Digital Small Business Insurance Survey unveiled interesting conclusions, namely:

• Just 24% of SMEs bought their business insurance online
• 53% of SMEs prefer a one-stop digital shop for all manner of business insurance practices
• 74% of SMEs were fairly certain about their business insurance requirements but only 16% had online insurance and 18% did not have liability coverage
• 48% of SMEs who plan on switching providers by 2022 intend to purchase their insurance online while 65% are fairly likely to purchase their insurance online
• Respondents who purchased personal insurance online had a greater tendency to want to purchase their business insurance online (70% of those polled)
• New SMEs (opened within the last 1 year) are 20% more inclined to purchase their future insurance online than with an established brokerage

Clearly, the biggest trend in the business insurance industry is a move towards digital insurance options. This is particularly true of SMEs. The findings of surveys are consistent across the board, with strong percentages in favor of digital offerings including buying insurance policies online, tracking claims online, and making changes to business insurance policies online. The industry is rapidly moving towards digitization and this is shifting traditional enterprise towards dynamic and cost-effective solutions.  The customer experience necessitates an approach that is less bricks and mortar and more AI, self-service and driven by intelligent communication tech.   

Business Insurance Trends 
The digitization of the business insurance industry is clearly the biggest shift taking place in the industry. Insurtech is also redefining the landscape, making it possible for customers to take charge of their own business insurance needs. The adoption of innovative practices will radically change the manner in which insurance companies operate, including changes in the value chain through the development of initiatives such as the digital greenfield, breaking free from existing frameworks and the adoption of change management with a strong focus on shifting business models. Businesses and business insurance companies are relying more on a digital approach to customer operations, with customer satisfaction, automation, healthy ecosystems for business insurance, and access to the right data compliments of AI and machine learning.

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