GlobalData has reported that the UK small and medium-sized enterprises (SMEs) insurance market recorded 3.6% growth in 2017, but that it remains flat in recent years despite UK businesses continuing to grow year-on-year.
The report, UK SME insurance market Dynamics and Opportunities 2018, finds that declining penetration rates, especially among the smaller companies, is a key trend across the market. At the same time, competition is strong across the market and insurance companies can only tackle this if they find an effective way to engage with micro business and in particular sole traders, says the report.
Insurance Analyst at GlobalData, Ben Carey-Evans, commented: “This is a worrying trend for insurers, as the majority of new businesses fall into this size category. If insurers want to expand their portfolios they have to target this group successfully, with cheap and easy-to-understand policies.”
According to the firm’s 2018 survey, for sole traders, insurance penetration rates witnessed double-digit percentage point declines in 2018, as did SMEs with between one and four employees. In the previous year, the number of micro businesses, which is defined as between one and nine employees, increased by almost 200,000 while sole traders grew a further 155,500.
The survey notes that these new businesses are less likely to be aware about the insurance they require, which places extra emphasis on insurers to seek out these firms and educate about them about the protection they need.
“As many of these sole traders will be entering into new territory the information they receive is crucial. They will receive advice on business bank accounts and tax, for example, but fewer resources are available for insurance.
“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 emphasize 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,” added Carey-Evans.