Australian SMEs are taking a “too easy” approach to protecting their businesses and risk leaving themselves exposed, as they opt to go it alone, according to a report released today.
The Vero SME Insurance Index, now in its eighth year, surveys more than 1500 business owners and decision makers on their insurance purchasing behaviours and analyses their perceptions of brokers and their value.
More than three quarters (75 per cent) of SMEs said evaluating the insurance needs of their business was easy, with just 56 per cent saying they found managing claims easy. Those who said it was easy to evaluate insurance needs were more likely to purchase insurance direct, yet less likely to have ever conducted a formal risk assessment of their business, potentially compounding the issue.
However, with 59 per cent of SMEs saying they feel more confident in their risk preparedness when they are involved, Anthony Pagano, Head of Commercial Intermediaries, Vero, said this presented an opportunity for brokers to demonstrate value and regain trust.
“Without broker expertise, these “too easy” SMEs are at significant risk of being under-insured or having inappropriate insurance for their needs. Those who know insurance understand how intricate it can be,” Pagano said.
“Interestingly, only 39 per cent say they find it easy to understand policy wording, which further shows they might be putting themselves at risk. SMEs that value the expertise of their broker have a more positive experience all round, are more likely to feel confident they are prepared to meet risks, are more satisfied with their broker, and are less likely to reduce broker usage.”
The report also reflected on the changing purchasing behaviour of modern SMEs and the emerging trend of ‘hybrid purchasing’. “We can see SMEs are buying their more complex covers, such as indemnity or industrial special risks, through brokers, while buying simpler covers, like motor vehicle or workers compensation, direct,” Pagano explained.
Trust was also a hot topic for SMEs, with 47 per cent saying they were more wary of the insurance industry, up from 36 per cent in 2018. “SMEs might be more cautious of the insurance industry, but brokers can take steps to rebuild clients’ trust,” he said.
“Our data shows brokers can help increase trust by focusing on what they do best – offering value-adding services.” The main broker tasks that correlate with increased trust includes providing in-depth information and analysis (72 per cent) and advising policies based on risk profile (70 per cent).
“SMEs are more likely to trust brokers that provide in-depth analysis, risk profiling and checking up on changes to their business that could impact insurance needs.”
The report also states that claims time remains the moment of truth in insurance, with SMEs looking for brokers to make the process as easy as possible. “According to the research, just under half of those who have made a claim felt satisfied with the process.”
Now is the time to act, with only 49 per cent of SMEs satisfied with their claim experience, brokers could improve their service in this area. “If a broker is involved in the claim process, customers are likely to be more satisfied and less likely to feel the claim is complex. The main feedback we hear is that people want clarity about the process – so it’s all about communication and managing expectations.
“Every broker knows – it’s important to take the time to have an open and honest discussion with your client when they put in a claim, talking them through the process, giving them a timeline and advising them on the likelihood and degree of their claims’ success.