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SMEs not convinced insurance giving value for money - Vero

09 Dec 2011

Only a third of SME business owners believe they get value for money for their insurance, according to a major new research project carried out by Vero.

More than 600 SME decision makers participated in Vero’s SME Insurance Index – the first of its kind carried out by the insurance industry.

When asked whether they believed they were getting value for money for their insurance, 40% said no, with a further 27% having no answer, or being unsure.

The overall survey findings indicate that the insurance industry needs to re-emphasise its value to small to medium enterprises (SMEs) following this year’s natural disasters, says Andrew Mair, Vero's EGM, Intermediated Distribution.

"The findings highlight both challenges and opportunities for the commercial insurance industry in 2012. The impact of the disasters has left SMEs more wary of the insurance industry, although the majority of say they are happy with their current insurance arrangements."

While relationships between brokers and the 65% of SMEs who are their clients are generally strong, the perceptions of brokers by SMEs who choose to buy directly were distinctly different. When asked whether it would cost more to buy the equivalent insurance from a broker the majority of direct customers (56%) believed it would – most expecting to pay an extra 10-20% for a broker's services. By contrast, those already using brokers tended to believe that it would be the same price or more expensive to purchase their insurance direct, without a broker.

Those that use a broker provided a variety of reasons for doing so, generally focusing on the relationships, trust, and advice that a broker can provide. Those who didn’t use a broker tended to characterise them as 'middlemen'.

"This presents opportunities for brokers to demonstrate their value to those currently purchasing insurance directly," Mair said. "They could attempt to create a relationship in which they can demonstrate the partnership they offer, or they could show the more tangible benefits brokers can offer in the form of better, more appropriate, more cost effective or more tailored coverage."

Other key findings

  • Despite the natural disasters earlier this year and the backlash against the insurance industry 89% of respondents are happy with their current insurance arrangements.
  • Following the recent catastrophic events, two-thirds of SME decision makers are expecting the cost of their insurance to rise when they next renew their policies. Of those expecting a price rise, almost half (47%) expect it to be fairly sizeable – an increase of 10% or more.  
  • The common reason given by SMEs for changing their insurer was pricing. Of the 44% of SMEs that reported a change in insurer in the past five years, 38% said pricing was the main factor in their decision, ahead of the quarter that changed to get better cover with their new insurer.

The full report can be downloaded here.

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