SMEs buying more 'simple' cover direct: Vero index
Businesses are buying more straightforward insurance directly as they access a mix of channels, while satisfaction levels when using a broker have jumped sharply higher, the latest annual Vero SME Insurance Index released today shows.
Key findings from the index, in its eleventh year, show 14% of SMEs purchased 90% or more of their insurance through a broker, down from 27% last year, while mixed channel buyers increased to 54% from 44%. Customer satisfaction regarding brokers increased to 84% from 60%.
“The biggest reason SMEs gave for not using a broker is the belief that they can do it easily themselves, not broker dissatisfaction, which is of some comfort to brokers,” Vero Head of Commercial Intermediaries Anthony Pagano said.
Price was also a key factor with one third of mixed users saying they don’t go through a broker because it is more expensive.
“This is where the intangible value of the broker’s expertise comes into play,” Mr Pagano says. “Brokers can provide a holistic view of clients’ business and risks and ensure the cover reflects the exposures they are now under, saving SMEs time, money and heartache down the track.”
The results highlight opportunities for broker involvement across more of their clients’ overall requirements, but Mr Pagano says that also requires a conscious decision on the level of advice.
“If a broker is going to act as an advocate for that client, and say I can also handle your home, motor etc, then, they have to allocate time and advice to that process as well,” he tells insuranceNEWS.com. “If they do, they have set the client up for success because there is more certainty and there is going to be reassurance when it comes to claims times.”
Vero says the large increase in satisfaction levels could reflect the unique global circumstances experienced in the past year, and is a trend seen broadly across industries, as well as impacts of the hardening market.
Mr Pagano says with so much uncertainty, SMEs welcomed the support of brokers looking out for their best interests, particularly as claims continued during the covid pandemic.
“When things were quite tough, getting that local personal service, went a long way,” he said. “You don’t feel like it’s you against the rest of the world.”
The hardening market has also allowed brokers to step up in explaining the various influences driving premiums and in providing advice over actions they can take to minimise exposures.
The index results are based on a survey of 1500 SMEs. This year, for the first time, Vero also separately provides findings from a survey of 100 insurance decision makers from larger companies with at least 200 employees.
Larger businesses have an even higher satisfaction rate, with 96% scoring their broker at least 8 out of 10.
The survey found 73% of large buyers purchased insurance through a mix of direct and broker channels, with 6% buying direct and 21% substantially through a broker.
Vero says that “a surprising number” of large businesses claim to also buy more complex cover such as business interruption and cyber direct, as well as some straightforward cover.
Compared to SMEs, large businesses are more likely to say the price is an issue: 37% say they don’t use a broker because they think they will recommend policies with higher commissions, which compares to 22% of SMEs, and 33% say it would be more expensive to go through a broker, the report says.
Mr Pagano says brokers must demonstrate that their role is about risk advice, rather than simply completing transactions based on price, and that clients value those who understand both their individual business circumstances and the industry in which they operate.
“We know business growth and increased business complexity are the biggest reasons for SMEs to engage a broker,” he said. “With risks and uncertainties associated with Covid-19 still present, it’s never been a better time for brokers to re-connect, re-position or reinforce the strength of their client relationships.”
