The SME insurance market is estimated to be worth £8.3bn by 2020
Insurance penetration rates saw double-digit percentage point declines for sole traders and SMEs with one to four employees (68.40%) in 2018.
While the SME insurance market saw growth of 3.6% in 2017, the latest report ‘UK SME Insurance Market: Dynamics and Opportunities 2018’ from data analysis firm GlobalData has warned insurers are failing to effectively engage with micro-SMEs, and particularly sole traders.
The news follows comments from new Simply Business group chief executive David Summers that micro-SMEs are increasingly looking for a digital solution to their insurance needs, which he said traditional face-to-face brokers have been slow to provide.
The GlobalData report based on survey data looked at the uptake of commercial insurance. And because of the nature of competition in insurance, GlobalData has warned that failing to engage with sole traders and micro-businesses could hinder insurers in the SME market.
Last year the UK SME insurance market grew by 1.4% to £7.8bn and is forecast to be worth £8.3bn by 2020.
Ben Carey-Evans, insurance analyst at GlobalData, explained that this is a “worrying trend for insurers” because the majority of businesses fall in this size category.
He said: “If insurers want to expand their portfolios, they have to target this group successfully, with cheap and easy-to-understand policies.”
Carey-Evans explained that many sole traders entering into new territory are unaware of what insurance cover they need, so the information is “crucial.”
He added: “Most sole traders will have transferrable experience in lines such as property and commercial motor from personal lines, so it is the liabilities that insurers really need to emphasise the importance of.
“They need to explain to sole traders it isn’t just a grudge payment, but something that can save their business a great deal of money.”
Marsh this week reported in its Global Insurance Market Index that UK commercial insurance pricing has increased for a fourth consecutive quarter.
It revealed the average commercial insurance prices in the UK increased by nearly 2% in Q3 2018 and saw pricing increases in cyber, professional liability and directors and officers.
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