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SMEs are turning to online insurance to protect their business globally as the sector begins to digitally transform

Small and medium enterprises (SMEs) are the backbone of every economy which accounts for 99 per cent of all firms and 70 per cent of employment. With 97,000 new SMEs formed each year in the UK alone, small and medium businesses are also known as the most vibrant sectors of the economy. Responsible for over 50 per cent of the global GDP, the size and significance of the small and medium enterprises industry stay pivotal to economies across the world.

The entrepreneurs of the SME industry are also known as the risk-takers when it comes to new business initiatives. Hence, it is important for these individuals to protect their interests. Cutting corners with insurance may put their business at risk. Underinsurance can be a major hurdle if they find themselves without sufficient protection when things go wrong. Risk is an intrinsic part of businesses today especially for small enterprises that threaten the dream venture. Insurance is a discerning way to check liabilities in the event of harm to assets and business. Even today, the common perception is that insurance translates to either life insurance or health insurance. However, the fact is that insurance covers everything and can be customised to fit the requirements of industries and small businesses. Depending on the industry and geography, there are several cost-effective and overarching insurance packages available for them to stay strong with a firm growth cycle. Alongside the market growth, their need for insurance also increases. 

A study reveals that many small businesses are often unknowingly underinsured, leaving them at risk of paying out large sums in claims and legal costs when a conflict occurs. For example, across the globe, cyber cover for small business is extremely low, with just 16 per cent of global firms telling PwC they currently have cyber insurance, despite an additional 46 per cent acknowledging it could be applicable for their business. SME insurance is witnessing a rise in countries like India in terms of products being offered and the companies that offer the products. SME packages in India offers the flexibility to combine covers of one's choice in a single policy. Standard packages cover fire and natural perils and burglary incidents. However, the sector has still not adequately met the need for more tailored products for the SME segment.

Small businesses turn to online channels to find the right insurance services quickly.  This, in turn, opens a door for insurers to develop new ways of helping their customers with bespoke products. A growing number of small businesses say they are looking to interact with their insurers online, with 36 per cent saying they will buy online in the near term, and 48 per cent within five years, according to a survey by PwC of 2,100 small businesses from 14 countries across North America, Latin America, Asia and Europe. It shows the insurance market for SME is likely to wholly change to match the digital transformation seen in personal insurance over the last decade.  Steve O’Hearn, global insurance leader at PwC says “insurers must have the capabilities to understand their customers and have technical solutions allowing them to rapidly evolve and adapt solutions as the market changes." They also should look at an emerging generation of startups not just as customers but as potential partners in providing new technology solutions and value-added services, creating more responsive, and targeted solutions, he adds.

The survey shows that small businesses in the UK are the most digitally savvy of their peers across the world when it comes to interacting with their insurance providers digitally.  Around 43 per cent say they have purchased insurance online versus 24 per cent on average globally. Companies that are aiming to be customer focused need to act now on customer asking for a more digital experience for their business, says Gero Matouschek, PwC EMEA insurance leader. There are two opportunities to be addressed, suggests Gero. Firstly, closing the digital gap in terms of communications and delivery, and secondly, closing the gap on a segment that seems underserviced so far. There is no one size fits all solution. There will need to be market and insurance-specific answers to what the customer needs. 

Experience with buying personal insurance is the single biggest predictor of how a business wants to get its business insurance. Over 59 per cent of those who bought their personal insurance online also purchased their most recent business insurance online, says the study. And 70 per cent of owners who purchased their personal insurance online state they would like to purchase their business insurance online in the future.

It is crucial for SMEs to pick the right insurance plan to avoid being underinsured or overinsured. As the business grows, so does the budget for insurance and the management of risk. If the business wanes, the business stakeholder needs to know when to reduce the sum insured, allowing them to put their money in the right places to keep it sustainable. It is all about prioritisation.

From small factories, consultancies, architects to hospitality the growth possibilities are vast. Even when the market is experiencing slow growth rates, the rising energy prices and growing consumer demand creates increasing reasons for SMEs to adopt sustainability strategies.

The demand for online insurance products also throws a new set of challenges for the industry. Insurers will have to decipher customers' requirements if they want to evolve to tailor-made and winning solutions. They'll also need to gauze the technical competence of their platforms so they can innovate at a similar pace to their customers. Customisation presents several challenges with SMEs coming in different shapes and sizes. And there is no one-size-fits-all solution model. To accommodate this requirement, insurers must offer packages that go with individual needs. Businesses do not want to pay for insurance that they do not need, especially in during slow growth phase. Insurers face challenges as they strive to gain a competitive advantage. 

Education and experience also offers challenges, as both are used to educate the potential client on the benefits of their coverage. Insurance is not a luxury in business, it is a necessity. The right plan will provide protection during the possible storm ahead. When a broker knows their packages well enough, only then he would be able to explain the benefits of the plan and the risks linked with becoming underinsured. A well-qualified and informed broker can also customise the schemes for their client, which is imperative for the SME sector.

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