Targeting SMEs in UK General Insurance 2008

• A detailed look into SMEs' insurance purchasing patterns
• An evaluation of the potential for growth for direct insurers and bancassurers in the SME sector
• Action points detailing potential strategies for different providers wishing to target SME business

• Improve customer retention by understanding SMEs' reasons for staying with a provider, as well as their reasons to switch providers
• Boost customer acquisition by understanding what insurance products SMEs are willing to buy online and via the telephone
• Understand the current competitive environment of the SME sector in relation to competitor strategies and current distribution trends

Overview

Catalyst

Summary

Methodology

Executive Summary

Packages are a popular choice for SMEs with employers’ and public liability being common products among SMEs

A number of players have enhanced their product offerings and service features in a bid to target SMEs

The broker channel continues to dominate the market with retention levels remaining high

A large proportion of SMEs are unlikely to switch to a new provider

A significant proportion of SMEs are open to purchasing their insurance via the internet or phone

Market Context

Introduction

The general liability, commercial property, commercial motor and pecuniary loss markets recorded a fall in GWP in 2006

SMEs account for the vast majority of firms in the UK, and SME GWP is estimated to be in the region of £3.5 billion

Packages are a popular choice for SMEs with employers’ and public liability being common products among SMEs

A number of new players entered the SME market in 2007 and 2008, increasing competition

Alliances between brokers and insurers were evident in 2008, as players continue to target growth in the SME sector

A number of players have enhanced their product offerings and service features in a bid to target SMEs

Insurance providers tend to target the SME market through size and industry segment

Distribution Dynamics

Introduction

The broker channel continues to dominate the market with retention levels remaining high

Most SMEs do not receive additional services from their insurance providers and are satisfied with this arrangement

Potential Switchers

Introduction

A large proportion of SMEs are unlikely to switch to a new provider

A significant proportion of SMEs are willing to purchase insurance from a bank or direct in a bid to save money

A significant proportion of SMEs are open to purchasing their insurance via the internet or phone

Action Points

Banks should challenge their current image among SMEs and focus their attention on targeting start ups

Brokers must remain competitive on price when targeting SMEs and focus on advisory services

Direct insurers would benefit from emphasizing their low cost and industry expertise

APPENDIX

Definitions

Methodology

2005 definitions for lines of business

Pre-2005 definitions for lines of business

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

TABLE OF FIGURES

Figure 1: The general liability, commercial property and commercial motor markets recorded a fall in GWP in 2006

Figure 2: Most brokers believe that premiums will remain static across all commercial lines

Figure 3: The vast majority of UK enterprises are SMEs

Figure 4: Most SMEs will hold an employers liability and public liability policy

Figure 5: Most SMEs will purchase their insurance in the form of a package

Figure 6: Most SMEs purchase their commercial insurance through the broker channel

Figure 7: Most SMEs purchase their insurance through face to face contact with their insurance provider

Figure 8: Most SMEs are satisfied with the service they have received from their insurance providers

Figure 9: A large proportion of SMEs have been with their insurance provider for more than 10 years

Figure 10: Receiving ongoing advice from their insurance provider is important to most SMEs

Figure 11: Many SMEs consider the price of an insurance premium to be an important factor when choosing a commercial insurance provider

Figure 12: Legal advice, risk management and financial advice were the three most common services stated by SMEs

Figure 13: The majority of SMEs did not pay an extra fee for additional services received from their insurance providers

Figure 14: Financial advice and employee benefit advice appeal the most to SMEs seeking extra services from their insurance providers

Figure 15: The vast majority of SMEs that do not receive additional services do not seek extra services

Figure 16: Most SMEs surveyed in 2008 have been with their insurance provider for more than 10 years

Figure 17: Respondents belonging to the wholesale and retail trade and repairs sector are more likely to switch providers

Figure 18: The majority of SMEs plan to remain with their current insurance provider over the next 12 months

Figure 19: SMEs that have been with their insurance providers for two years or less are twice as likely to switch to a new provider

Figure 20: Price is a key motivator to SMEs switching providers

Figure 21: SMEs considering a switch to a new provider will do so to save money

Figure 22: SMEs may consider a purchase from a bancassurer in a bid to save money

Figure 23: A significant proportion of SMEs believe that banks lack specialist expertise

Figure 24: Price remains central to SMEs considering a purchase from a direct insurer

Figure 25: Most SMEs are content with their current providers and therefore would not consider going direct

Figure 26: Previous experience is an important source of information to SMEs choosing an insurance provider

Figure 27: The convenience factor appeals to many SMEs prepared to purchase insurance over the phone

Figure 28: A significant proportion of SMEs would not consider a telephone purchase because they simply prefer face to face

Figure 29: A significant proportion of SMEs would consider a purchase online in a bid to save money

Figure 30: SMEs show a greater inclination to purchase employers’ liability and public liability via the telephone and internet

TABLE OF TABLES

Table 1: Commercial general insurance market GWP and year-on-year growth, split by sector 2002-06

Table 2: On average, by approximately what percentage have premiums changed in the last year, for the following business lines?

Table 3: UK enterprises by size and turnover, 2006

Table 4: Average annual insurance spend, 2008 (£)

Table 5: Top 10 brokers by number of clients with turnover below £20 million, 2006

Table 6: Q: “How important is it to receive advice on an ongoing basis from your insurance provider?”

Table 7: Q: What business sector are you involved in?

Table 8: Q: “How large is your company in terms of number of employees?”

Table 9: Q: “How large is your company in terms of turnover?”

Table 10: Q: What business sector are you involved in?

Table 11: Q: “What business sector are you involved in?”

Table 12: Q: “What banding does your company fall into in terms of general insurance premium income turnover?”

Table 13: Q: “What proportion of your business is commercial insurance compared to personal insurance (in terms of premium income)?”

Table 14: Crawford’s Directory industry sectors