At a glance
- Risk profiles of smaller businesses are changing and their cover needs expanding
- Brokers can give younger SME businesses, a rounded view of their exposure to risk
- Understanding the changing needs of SMEs can help increase the business brokers do with small firms
Businesses are becoming more complex and so are their needs. Fifteen years ago, building a business often meant striving for a bigger physical presence, adding more staff, going from serving local to regional to national and, eventually, international markets.
In insurance terms, this provided a steady evolution of product needs as the company steadily grew, broadened its reach and activities, and acquired more property and people.
A new breed of entrepreneurs, however, are building their businesses quite differently. Born in the 1970s and 1980s they understand instinctively digital technology’s transforming effect on almost every business sector.
The businesses they start are likely to be faster growing and they will run leaner with fewer full-time staff and smaller premises. Some might even do without these altogether – hiring shared space and using freelance help and outsourcing non-core activity.
Forms of cover that can add value for SME owners
- Technological risk
- Health and safety
- Public liability risks
- Professional indemnity
- D&O cover
- Online trade and logistics
- Travel-related cover
They also increasingly have an international outlook right from the start. More complex they may be, but their business is also worth cultivating as they also run higher growth businesses.
“While it may seem like this is a group that is difficult to reach and serve given their smaller physical footprint, in fact brokers have a lot to offer them,” says Jason Eatock, Zurich’s Head of SME.
But knowing how this new breed of businesses tick is essential, says Jason. “Individuals within more technology-led companies have higher expectations, but they also appreciate high levels of service,” he says. “It is an opportunity for the broker to help give them a holistic view of their business.
“Understanding what drives these clients and what needs they have compared to someone who is 55 years old and who does not run a software company, for example, is important. You might want to talk to a traditional bricks and mortar business about property exposure, but if you are talking to a 28-year-old with their own software business, they may not have property.”
Value of advice and insight
Research from Zurich that has found the structure and risk profiles of SMEs are changing. “SME customers are becoming more complex,” says Richard Coleman, interim Managing Director and Director of SME at Zurich. “The recession forced many of them to diversify, and the advent of new markets and technologies has brought an unprecedented pace of change.”
Jason adds: “Many young entrepreneurs, in particular, will be inclined to turn to brokers, who can help them identify areas of the business that need attention. They may be focused on technological risk, for example, and it may be that they are not placing sufficient emphasis on employment, health and safety or public liability risks. They are also likely to value advice from brokers on professional indemnity and directors’ and officers’ cover.
“We are witnessing the most significant degree of change in the SME sector in decades because of the digital revolution. Portions of the SME economy are now globalised. It is easier to export than ever before now that online trade and logistics are run online. They may also need travel related insurances because they are flying all over the place.
“This is a good news story. SME needs are becoming more and more complex and it is an opportunity for brokers to offer advice and help them manage the risks that go with it.”