A recent survey of SMB owners in the U.S. identified that nearly half of the companies who have been in business for more than one year have never had an insurance policy. Whilst that might not be surprising in the context of the U.S., after all, insurance across the pond can be prohibitively expensive, what may be surprising is that many SMBs in the U.K. lack any sort of coverage as well.
According to Dean Laming, the Managing Director of Henry Seymour Insurance Brokers in Croydon, one reason is “the lack of industry-specific policies for SMBs across the country.” Industry insiders acknowledge that they haven’t done enough but this is largely because many of the large-scale insurers in the U.K. are built to either offer “one-size fits all” policies to a large number of people and companies or to provide exotic policies for FTSE 100 companies who can afford to pay higher premiums.
In many ways, this is a direct result of the push for insurers in almost every market to answer the demands of shareholders and investment bank analysts rather than their customers. This shouldn’t come as a surprise as a similar dynamic has played out in many markets – especially in the financial services space.
What does this mean for SMBs? For starters, many do not know where to turn to when it comes to finding reputable insurance advise. This is largely because the days of the local insurance agent who represented several companies have been supplanted by the internet. Granted, those with time and knowledge can more easily search out the best policies, but the realities of running a small business mean that most owners are fighting to keep the lights on.
Another impact for SMBs is that an increasing number are deciding to go without insurance coverage. After all, the markets are complicated and expensive – so, why pay for coverage that they will probably never need?
Whilst this argument does appear to make sense, it is a road to ruin as the entire point of having insurance coverage is to protect businesses and their owners from hard to predict risks. However, this does assume that a local business owner has the funds to pay for the policy in the first place; something which is not always a given.
For many business owners, this lack of insurance coverage can hold back their business. For example, a tradesman without even minimal coverage might not be able to bid on certain projects – especially larger scale projects which might offer the opportunity to grow their business over time.
One solution to this problem is for insurers to offer affordable specialist policies such as the types offered by Tradesman Saver. “When choosing tradesman or other types of business insurance, it’s important to understand exactly what is covered and to know about any endorsements that apply to the policy, says Darragh Timlin, Underwriting Director for Tradesman Saver.
“Generic policies tend to include clauses in the policy wording that may not be appropriate. Choosing a specialist insurer means that the policy will be tailored to the specific sector and any endorsements which may apply to the trade, will be clearly laid out.”
But many corporate insurers have been slow to recognize the market opportunity of such offerings.
What can be done? For starters, insurers need to alter their approach to insuring small businesses. This starts by getting back to basics either with local agents who understand these businesses or by offering online tools which can allow SMB owners to benefit from the combined knowledge and experience of dealing with similar businesses across the country.
Another change is that insurers need to focus on the experience they are offering SMB customers. Let’s face it, online shopping has become ubiquitous and this means that most SMB owners are open to a fully digital process which covers everything from buying coverage to placing claims.
The benefit for insurance companies is that such a service can cost a fraction of traditional SMB insurance offerings and this means that they can justify the service to their shareholders. Beyond this, the government can play a role, not in mandating insurance coverage but rather by helping SMBs to understand the importance of having insurance.
This could lead to a change in the mindset of business owners from the Midlands to the Scottish Highlands, as they will start to view insurance, not as an unnecessary expense, but rather as a valid means to protect their businesses from risk.
In doing so, business owners can simultaneously protect their livelihoods and prepare themselves to take on the managed risks needed to grow over time. The result is a virtuous cycle where local businesses grow, hire more staff, and become key contributors to their communities. In this post-Brexit business environment, this is the best way to secure the future of these companies and the U.K.
