Cathie Bruce asks whether brokers and insurers might be missing a trick in developing the potential of the UK's SME sector
A re we failing to tap into the full, rich potential of the UK's small to medium-sized enterprise (SME) market?
Are we missing opportunities to boost much-needed revenues for brokers and slam the door in the face of the growing competition from direct players, banks and consumer brands?
Important questions for those of us reliant on the continued dominance of intermediaries in this sector, and issues that need our urgent consideration. If we don't support brokers and work with them to develop some new ideas and solutions to help them meet the needs of their customers, the consequences could be dire.
Why should we worry? The evidence demonstrates that brokers and SME clients are a natural fit. Businesses of this size really value the quality of advice and range of service that intermediaries provide. Recent research undertaken for Groupama Healthcare by NOP only confirms the mutual benefit that flows from such strong relationships.
But are we failing to appreciate the highly dynamic nature of these entrepreneurial enterprises? Are we failing to keep pace with their changing needs? The competition is circling. We'd be foolish to take for granted the current pre-eminence of brokers.
So how should we sharpen our act and retain our grip on the lion's share of the £5.5bn SME annual premium spend?
The first step is to acknowledge that there has been little development and innovation in recent years. The wrappers may have been smartened up, the marketing attack may have more contemporary fizz, the distribution mechanisms may have evolved, but the underlying products are much the same as they have been for centuries. Call it what you like but commercial combined is still commercial combined.
Inevitable, you may say: the core of an insurance transaction - the guarantee to meet a valid claim - will always remain the same. And that's true. But the very simplicity of the product, and its potential to be reduced to a price-driven commodity, is the reason why banks and supermarkets are sharpening their claws.
To remain dominant, brokers (and those who support them) need to build and extend their service to SMEs. We need to create a new generation of insurance-based propositions that focus on more than the indemnities and play to the strengths of brokers as highly skilled risk managers and professional advisers.
With the growing dominance of the internet as a means of distribution, we are only constrained by our creative capabilities. Brokers can now devise and deliver advice and personalised service-based solutions straight to each client, strengthening a relationship that should prove impervious to pile-it-high-sell-it-cheap marketing.
Brokers who do nothing more than sell insurance are going to struggle. Those who grow to become consultants on a wide range of business issues can flourish.
SMEs need risk management and disaster recovery support as much as they need
health and safety strategies too. They need legal services and help with HR. They want assistance with tax, accounting and business development. What about other issues, such as late payment or debt recovery? Shouldn't brokers be seizing the initiative?
"Hang on," brokers might say. "I'm an insurance specialist, not a management consultant/factoring specialist/employment law guru." Quite.
But the internet means you, as a broker, can access and assemble the services and facilities you need, leaning on pro-broker companies for assistance. There really is no limit to what we can do together.
According to Datamonitor, 60% of SMEs receive no additional services from their broker beyond basic insurance cover.
But the vast majority of those that do place a high value on what they get and are prepared to pay for it.
We don't even have to stray far from insurance itself to find potential. What about cover for emerging risks such as hacking or identity fraud, for example? Or intellectual property cover? What about contingency planning? And why not extend into a more mainstream class of business, such as healthcare?
Thinking about health
Have we provided our clients with all the cover they need, or is there a chink in the armour for the competition to exploit?
We are great at insuring bricks and mortar, plant and machinery, and other physical items. But what about any business's prime asset - its people? Penetration of private medical/personal accident cover is minuscule, yet we devote all our energies to selling the policies clients already hold.
Talk to any executive running an SME and they will tell you that one of their biggest concerns is staff absence. When you explain how PMI can help manage this risk, they are thrilled. Our NOP research confirms that almost 50% of SMEs buy PMI for this very purpose.
Another trap to avoid is lumping all businesses in the SME sector together when, in fact, no two are the same. Lawyers and advertising agencies might both be office risks but their insurance needs are hugely different. Each needs a tailored proposition that reflects their unique circumstances.
Henry Ford got a long way on the dictum that customers could have any colour so long as it was black, but the world has moved on - expectations have risen, and we must now be ready and able to service a spectrum of demand.
And while we're on the subject of Ford - let's not forget that every big business was once a small business too.
Again, the internet will prove invaluable. As we slice and dice the SME market to target different affinity groups, we can refine and develop our offer, honing the finished product so that it becomes a perfect match for the client's requirements.
Some may focus on price. That's fine - we can be competitive. Some will want a full service, with all the consultancy support we can manage - no problem there, either. And, of course, some will want something in between, in which case we can mix and match from our comprehensive menu of products and services.
The important thing is that we are alive to the possibilities, alert to the dangers of complacency and aware of the competitive threats.
The SME market represents a rosy future for the broking sector. So let's ensure we make the most of it. IT
' Cathie Bruce is distribution and customer service director at Groupama