John Heaney, UK Commercial Insurance Manager, Hiscox
Why do SMEs not fully insure against all the potential eventualities that could impact on their business?
An SME comes through the broker's door, what are you going to sell to that SME? I guess the bog-standard MD, PI and PL products, mortar, money, employers' liability and so on. Most of that can be bought as an off-the-shelf policy from any of the main composite insurers. We're very good at doing that. You can probably do that online, not quite as yet but I guess that will come through. Are we providing the SMEs with the right covers in terms of what they require?
Brokers should provide the SME with the cover it requires, not up-sell all products.
Professional indemnity cover? Depends if it's required or not. A recent statistic says 43% of IT contractors do not have professional indemnity cover, and 43% of IT contractors do not have office insurance, or don't have insurance for their laptop.
Brokers should sell these clients computer breakdown and some computer data protection cover, and perhaps fidelity guarantee, a bit of travel insurance if needed.
Emerging business leads are 'cyber liability'. Are brokers talking to SME customers with an IT system which is communicating through email and could damage their customers' databases? Are brokers talking about employment practice liability (EPL)?
There are more EPL, or incidents that could give rise to a claim on EPL, than there are fires in the UK, and yet the first thing we'll think about is selling fire insurance.
Emergency assistance for SMEs and even, key man insurance, are being discussed, and kidnap and ransom insurance is something SMEs are asking Hiscox for to cover employees such as photographers, or those helping to rebuild the Middle East.
Do we really understand what the SMEs' exposures are? The SMEs don't understand what their exposures are, so how can they buy all this online? That's where the professional advice comes in.
The other barrier in terms of selling to the SME is in terms of the timing. If brokers don't talk about these types of insurance when the SME first sets up and insures its office, three or four years down the line when that gazelle company has hopped into something quite bigger, if you start to sell EPL cover at that point the guy's just going to think he's being up-sold and you're trying to make more commission. And he's going to ask you, 'Why didn't you talk about that when I was setting up? Why do I suddenly need this?'.
In terms of timing, to sell the D&Os and the cyber liabilities, I would suggest not to sell that at renewal because then it becomes more of a pressure purchase.
So where does that leave us as an industry? We have to educate ourselves about all these new covers. And as insurers, we have to understand the needs of clients as new regulation and laws come in.
We have to deliver this understanding to the SMEs at the outset. At the moment, I don't think the clients are there, so we have to educate them. And if we're going to talk about selling things through the web, how on earth are we going to get that information and learning across to the clients?