By Paul Williams, CEO, Ripe
UK consumers are increasingly favouring local businesses. More and more, the nation is choosing to support companies in their own community, rather than large multinational chains. For example, 72% of customers intend to shop at small businesses this year, a 10-percentage point increase from last year, according to Bankrate.
As a result, after struggling through Covid-19, many SMEs came back stronger, with over 58% of small business owners saying their experience with the pandemic made them more resilient. But with the UK now officially in a recession and amidst continuing economic uncertainty, are SMEs getting the right business support they need? In many cases, the answer is no.
That’s because many essential financial services products, including insurance, are designed without fully considering the needs and risk factors of each individual business. This ‘one size fits all’ approach means that SMEs could have to pay for cover they don’t need, whilst also missing vital protection that could one day prove critical. And it’s having significant consequences. In fact, of the 4.3 million SMEs in the UK, 50% are likely to be underinsured according to Aviva, making them vulnerable to financial risks.
The problem is further exacerbated by the fact that although SMEs are experts in their specific industry, they may not be familiar with the complexities of business insurance. The quote and buy process can be overly complicated, leading to a lack of understanding amongst those it should serve.
However, by truly understanding the needs of small business and building relevant, accessible products, we can better support the UK’s SMEs and help them to thrive.
Building technology from the ground-up
Understanding the challenges faced by SMEs must be central when designing insurance products for them.
For example, the cover requirements of a sports centre will vary significantly from those of a hair salon or a roofing firm. However, these differences are often not accounted for during the business insurance quote process. Salon owners can be asked if they need cover for ‘working at height’, an inappropriate question that doesn’t apply to hairdressers working inside. Unnecessary options may also be priced into the final package, meaning policyholders are paying for cover they don’t need.
The solution is clear: to provide simple, customisable insurance products for SMEs that allows them to tailor their coverage to fit. This can only be achieved by deploying advanced technology. Our custom-built proprietary platform, Juice, allows us to create these highly customised insurance journeys and makes the buying process easier for users. It also allows us to offer more competitive pricing; a significant point of difference in a time when price point still reigns as a leading deciding factor amongst SMEs choosing an insurance policy.
Prioritising user experience
Small business owners will typically find themselves wearing many hats, from handling customer service queries to running marketing initiatives and managing finances including buying insurance. But this process can be complicated and opaque, making coverage options difficult to understand without significant time investment.
Time is a valuable commodity for every business, but especially for SMEs, so providing insurance quotes as quickly as possible, with a streamlined buying process, needs to be a priority. Cover options should be clear and accessible to business owners who are juggling different tasks and don’t have prior knowledge of insurance.
The benefits of this are far reaching. Access to faster, tailored insurance products can save SMEs valuable time and financial stress. This has a powerful compound impact in the long run for productivity and business outcomes. In fact, maintaining just a 1% annual improvement in SME productivity over five years would grow the UK economy by a staggering £94 billion.
Ultimately, by focusing on building the best SME insurance products, we can support small business owners to focus on what they do best.
Stepping up for SMEs
With rising interest rates, energy and labour costs, small businesses are likely to face tighter budgets this year. For that reason, protecting their livelihood against potential risks and unexpected situations is crucial.
Business insurance provides a critical layer of protection. However, SMEs need confidence that the products and services they choose are relevant to their specific business, and – crucially – that they’re cost-effective. Recent polling from Lloyd’s Bank shows that 82% of UK SMEs view the country’s economy as very or extremely weak. Making tailored, good value insurance accessible to SMEs can therefore make all the difference as they brace for the challenging times ahead.
SMEs have been overlooked by the financial services industry for too long. We need to collectively rethink and redevelop our products to give SMEs the right support to thrive in our economy. As the UK public is prioritising the businesses in their communities, the insurance sector must as well.
