Kevin Pallett says quality of service rather than cut-price premiums will ensure brokers retain the lion's share of SME business
Many firms are jostling to capture a slice of the SME market currently dominated by traditional brokers. Building societies and banks see insurance as a profitable addition to the other financial services they provide to the sector. And then there are the direct insurers, who want to replicate the success they've enjoyed with personal lines.
Whatever your insurance organisation, just two broad business strategies will succeed - here or anywhere else - buy business by being cheapest; or win business by being the best.
By laying the foundations for long-term success by fighting a war on price, brokers are playing into their enemies' hands. Direct insurers can turn SME product development into a sausage factory, with off-the-shelf products that are quick and easy to administer. Brokers will not be able to compete with prices as they drive them lower and lower.
The only option for provincial intermediaries is to win business by being different - by offering a service that represents better value for money. To do this means analysing the market, determining the sort of products and services it requires, and then working alongside sympathetic insurers to deliver them.
More than anything, it means leaving behind the notion of selling insurance in favour of providing advice and consultancy - a revolutionary change in many instances. But the more you can deliver an advisory service, the more clear blue water you put between you and those who pile-it-high-and-sell-it-cheap.
Meaningful advice
Remember that SMEs don't want to buy insurance. They want to make a success of their businesses and make money. They need meaningful advice on how to manage their liabilities, reduce or eliminate risk, achieve health and safety compliance, and survive any incidents that do occur.
If they can hook up with a professional who knows about risk management, insurance placement, business continuity and claims handling, they will be prepared to forge a long-term relationship.
And why not? SMEs have relationships with other professionals such as lawyers and accountants that aren't founded on providing the lowest cost service. The service provided by brokers is more important. So why don't they feel they cannot be held in higher regard?
If a broker can demonstrate value and professionalism, any lingering prejudices held by the SME boss will be blown away. His eyes will be opened to the huge difference that exists between mere insurance retailing and genuine risk management consultancy.
This isn't to say SMEs won't still have an eye on the bottom line. But, given sufficient explanation and concrete examples of the benefits that advice can deliver, they will see that the premium size is only part of the equation. That value for money is more important than price.
Good advice can prevent incidents occurring - reducing disruption and, in many cases, increasing efficiency. Increased deductibles can help cut losses and reduce paper-chasing for low-value claims. Business continuity planning can get a business back on its feet in quick order and even prevent it from going out of business. The value of that? Priceless.
SMEs may think they just want the simplest, cheapest policy around. But that's because they haven't been educated to appreciate the true value of a professional service. Brokers that make the effort to preach this message will soon find they have plenty of converts.
' Kevin Pallett is managing director of Fusion Insurance
