SMEs – Insuring a small to medium sized enterprise

Modern Insurance interview panel discuss the issues in insuring SMEs.

Insuring SMEs

There is a problem with underinsurance in the UK’s SME sector. SMEs face a number of insurable risks, including but not exclusive to, theft and damage to property and/or stock, business interruption, and cyber threats. However, unlike larger enterprises, SMEs tend not to have a specialist insurance function, and may lack the resources, time and money to correctly access their insurance needs. Could data be the answer? Our session in Birmingham examined the changing needs of this particular market space and how data enrichment could enable customers to make more informed choices, while better defining the risks, and emerging risks, currently associated with SMEs.

Trevor Lloyd-Jones’s first question for the panel was regarding mapping and location data: “To what extent do you think mapping and GIS data can help bring a new dimension to dynamic pricing, underwriting and resources management related to major weather and other catastrophic events? Firstly, a bit of background – GIS (Geographic Information System) is difficult to define but it could be argued that any digital data that contains location based information is in fact a GIS. This location information is called spatial data and could be anything from the location of a property, to a postcode, or a county. GIS data can be used for a variety of reasons, but it is mostly used by larger players within the industry to analyse data or create rating factors used for pricing and/or underwriting decisions. While there were many positive points shared around the benefits of mapping and GIS data, there were some concerns aired among the group. “When does mapping and GIS data become a barrier to the customer?” asked Emma Jones, “It is important that we have got the customer in our sights at all time, because whilst it is good to have granular sophistication and detail, if we can’t insure the individual because of insufficient data sources then we can’t fulfil our job.” Flooding was the example of choice for the panel, with a number of individuals stating that insurers usually have different data sets when it comes to checking for flood zones and risk, leaving customers in limbo as they try to discover the potential risks associated with their property. There is certainly a gap in the market here which the sharing of data could help to solve; it would certainly ensure more properties and customers are protected and help to put preventative measures in place in the face of major weather events.

It is important that we have got the customer in our sights at all time – Emma Jones, Simply Business

Jones explained how her business has its own flood rating and that they are exploring how they can be dynamic using that tool while starting to be more pro-active in blocking and increasing those rates on the basis that something could happen. Dynamic pricing is a hot topic at the moment, and one controlled by GIS data. Tim Grant suggested that social media could also be used as a preventative measure, with further support guaranteed from having a claims team on the ground. “Do insurers not do that already?” asked Jonathan Guard. “We do, but the precision of forecasting event footprints is a limiting factor and one of the risks is crying wolf,” explains Simon Parrish, “We currently send out general messaging, but because we are intermediated, contacting the customer directly can be a slightly emotive subject for our brokers. We can advise our brokers about the at risk exposures that are on our books instead. We have the information and we can make sure it is available for use.” “While some brokers will prefer to handle the contact directly with the customer themselves, collaboration remains paramount,” said Grant, “brokers and insurers need to work together in these types of situations for the collective good of their client.” From the broker’s perspective, Juliet Williams said: “I would have no issue during a major event if the insurer wanted to take control because they have more capabilities than us as brokers. They are able to get the information to customers straight away.” It was clear that the table wanted further collaboration between brokers and insurers as they hoped it would create a more trusting and well-rounded relationship with customers and clients overall, but it is down to the industry to create that collaborative space.

Collaboration remains paramount; brokers and insurers need to work together in these types of situations for the collective good of their client – Tim Grant, Covéa Insurance

How can we move into a digital space?

We are currently seeing the market rushing to digitise SMEs. Customer preferences are changing, and with that the majority of customers are now purchasing their insurance online. However, as Will Wood pointed out, trying to generalise across the SME market is difficult because it is massively complex. It is not a one-size-fits-all scenario as there are still a lot of individuals that would prefer human interaction. Lloyd-Jones asked the table what other barriers there may be to digital processing. It was suggested that trust, awareness, the availability of data, connectivity, and the broker/insurer relationship were all barriers for further expansion into a digital space. “An immediate barrier to consider,” said Grant, “is the political and economic uncertainty we are currently facing in terms of Brexit. It is my understanding that small businesses are reluctant to invest right now because their future is so uncertain and times are difficult.” “Simplicity is key,” stated Parrish. “Data enables a slick interaction and the personalisation of cover but there are barriers in terms of customers being comfortable to share this. If insurers and brokers can offer SMEs simple propositions that provide them with assurance to protect their business, they really will be making their customer happy.”

Trying to generalise across the SME market is difficult because it is massively complex. It is not a one-size-fits-all scenario as there are still a lot of individuals that would prefer human interaction – Will Wood, Aviva

As the data becomes more accurate and immediate it will enable a better journey, as Jones explained. “Insurance has a history of being quite inwardly focused, we need to turn ourselves inside out and truly think about what the customer wants,” finished Grant.