The economy is undergoing its thaw from the shock and disruption of COVID-19. 

Accounting for more than 99% of all companies in the UK, SMEs represent the largest commercial segment in the UK. 

They also represent a huge portion of insurance premiums, with those written for SMEs accounting for more than 60% of gross commercial premiums. 

While many SMEs have developed their business models to adapt to turbulent times, there’s still plenty of upward potential for business insurers, not least from the recent explosion in freelancing and the emergence of the sharing economy.

The pandemic has given rise to fresh new demand for products such as business interruption cover, though not all insurers have had the dynamic mentality to capture a larger portion of the SME market.

Here are some interesting observations from a recent McKinsey & Co study, and some of the key ways insurance firms must rethink their SME insurance offerings for the future:

Digital has taken on new importance

Since the start of the pandemic, businesses have upped their use of, and dependence on, digital channels across the board. Most prominently, surveyed business leaders have said that the importance they place on digital services has increased by 5% since May 2021, spurred on by the efficiency and convenience they promise. 

However, most business leaders still want the option of interacting with a real human, a factor that has only increased over the course of the pandemic. Just like workers’ demand for greater remote working flexibility, this trend among SMEs is likely to persist even after the pandemic dies down.

The number of businesses that believe they will use SME insurance brokers less than usual or not at all in a post-COVID-19 world has risen by 10% since May, while 17% of all SMEs said that they would cease face-to-face communication with their insurers once the pandemic has abated.

The importance placed on access to reliable digital interactions has seemed to span all segments of the SME sphere. More than 20% of medium, small, and micro enterprises have indicated that they’ll be using digital interactions more in future. 

They also reported the highest increase in future plans to use digital tools.

Flexibility is king

Though businesses of all sizes have now managed to adapt to the challenges of the pandemic to some degree, business owners are still looking for ways to tighten belts and cut costs in order to ride out any future disruption. 

47% of SMEs now prioritise flexibility in their insurance coverage, indicating that insurers have shown an impressive appetite for innovation in personal products.

Businesses want someone they can trust

The financial challenges coughed up by the pandemic have been a scary experience for many companies, as increased volatility on all fronts has meant they can't rely on business as usual.

Moving forward, SME insurers will need to maintain a higher standard of transparency with their interactions with policyholders, and nurture the sense of reassurance and closeness that business leaders crave.

Current discussions about business interruption caused by COVID-19 have been permeated with an increased need for simplicity and trust in all business interactions, not least of all in areas like contract terms and insurance coverage options.

In the same vein, small and medium enterprises have also been showing a preference for companies and institutions that operate in a way that’s more aligned with their company culture and philosophy.

The power of user-friendly experiences

Small and medium businesses, just like individuals, don’t want to feel exhausted by the process of securing a new policy or amending an existing one. They’re looking for a stress-free experience reminiscent of modern-day e-commerce companies.

With this in mind, SME insurers must embrace simple interfaces, smooth customer journeys, and language that everyone can understand.

Some 30% of SME respondents said that they found various steps in the process of purchasing a new insurance product challenging, including the initial step of knowing what kind of coverage is the right option for their needs.

More and more, business leaders are looking for a one-stop solution that can identify and address all their insurance needs with relative ease.

The need to focus on the right segments

Long before the pandemic started, the prospects for SME growth varied dramatically from one segment to the next.

In the period between 2015 and 2018, smaller SMEs grew at around twice the rate of medium SMEs. With this in mind, business insurers need to be well placed when the disruptive forces of the pandemic lead some SMEs into exponential growth and leave others lagging behind. 

This is a challenging undertaking, but if insurers can identify the kinds of segments and industries that are due for an upcoming wave of growth and success, the rewards will be great.

The demand for new products

As many SMEs are bright new startups, their senior leadership are still working to determine how their risk has been affected by the pandemic’s ongoing upheaval. Business liability has taken on a whole new meaning since the pandemic hit. 

Now, companies that have any kind of physical, public-facing capacity need to find new ways to safeguard both their staff and customers.

It’s up to insurers to research and understand the new reality their customers exist in, the causes of the many changes they’re facing, and use this knowledge to create products that address their concerns directly. In many cases, this means creating new policies with a degree of flexibility in the terms offered to both new and existing customers.

To find out more about how Artificial can help your insurance business, get in touch.