UK SMEs have indicated that they are more likely to purchase insurance from an insurtech brand now than they were before the pandemic, according to GlobalData’s 2023 UK SME Insurance Survey. Over a quarter of SMEs said they were more likely to purchase through an insurtech brand compared to pre-Covid-19, whereas just 9.5% reported they were less likely.
Medium-sized companies are the most likely of the four types of SME to consider purchasing insurance from an insurtech brand. Over 40% of respondents within this category said the likelihood of purchasing from an insurtech has “increased” or “significantly increased.” These businesses are most likely to have the most complex insurance requirements given their size and are therefore also likely to have the most expensive cover. This increased willingness to look to newcomers in the insurance space—without the intangibles of legacy and reputation behind them—suggests that established players are beginning to fail the SME market or insurtechs have bridged the gap over the past three years. Ultimately, the truth of this shift probably lies somewhere in the middle of these two trends. SMEs can often require niche or specialist insurance cover but at a relatively low price given SME turnover. This has pushed some of the largest players away from the market, turning their focus onto the largest multinational enterprises with the highest billables. In turn, this has opened up the market to new entrants who are able to rely on digital-first architectures to provide SME insurance at lower rates with online onboarding and automated underwriting. The post-pandemic economic slump will also be driving many SMEs to seek cheaper cover, often found with insurtech players that are fundamentally subsidised by venture capital and private equity backers in their early stages. The high-profile business interruption court cases undertaken by several legacy players will have damaged reputations for reliability, also driving businesses towards newcomers.
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As company size decreases, so does the change in the likelihood of a firm buying insurance from an insurtech. It should be noted that many newcomers in the commercial insurance space position themselves as partners for sole traders/freelancers when they come to market (Superscript, Tapoly, Dinghy, etc.). This leans into the suggestion that many sole traders (and microenterprises) were highly likely to seek cover from an insurtech brand in the first place. Despite this willingness to purchase from such players, there is still a relatively poor awareness of leading insurtech brands by UK SMEs. For instance, the brands of the three players named above are, respectively, recognised by 11.6%, 11.3%, and 10.9% of UK SMEs—per GlobalData’s 2023 UK SME Insurance Survey. Insurtech players must make hay while their sun shines and (admittedly while fighting significant external economic pressures) look to improve brand awareness—among both SMEs themselves but also among brokers in the sector—in order to pounce on this growing tendency to seek insurtech-provided cover.
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By GlobalData
