Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the EU, accounting for more than half of Europe’s GDP. SMEs play a key role in adding value to every sector of the economy as they bring innovative solutions to challenges like resource efficiency which are essential to the UK’s competitiveness, prosperity, and resilience to external shocks.

The pandemic saw people utilise their spare time to develop new skills and establish innovative businesses, resulting in the emergence of a varied and robust niche business market. This surge has persisted post-COVID, driven by various macroeconomic factors including the rising cost of living, compelling people to explore and develop their interests to create new sources of income.

Small business founders and owners in distinct segments will know they need insurance but might not know what type of insurance they need, or all the eventualities they need to be covered for.

By directing their attention towards these specific segments, insurers have the potential to significantly expand their presence in the SME market. In this blog, we’ll explore ways that insurers can meet this demand.


Delivering bespoke insurance needs

SMEs differ greatly by segment and industry. Prior to the pandemic, people took on second jobs to supplement their income, however, after the pandemic, this trend has been driven by passion rather than necessity. The adoption of gig-economy jobs, either in lieu of a full-time role, or as a means of supplementing wages has changed the world of work. It’s meant that people can balance working a full-time job while pursuing their passion projects and making extra money.

Because of this, insurers must identify the different industries and segments that they want to attract and develop bespoke products and capabilities to serve them. Insurers must strive for hyper-relevance by tailoring their offerings to micro and small SMEs, providing simplified solutions, and introducing innovative approaches for rapidly growing segments.


Helping SMEs understand insurance

According to a recent study from EY, only 50% of survey respondents stated that they were very confident in the coverage they recently purchased, demonstrating a need for insurers to better educate their customers. Insurers should be helping their customers understand the how’s, the what’s, and the whys of the policies being bought.

Consider a scenario where a new small business founder enters a new sector like dog daycare (with the demand for puppy sales increasing by 104% during the pandemic, it’s unsurprising that the demand for dog daycare businesses has boomed). While recognising the necessity for insurance, niche SMEs may lack clarity on the specific type of coverage required or the potential risks they need to be protected against. If the insurer explains their options, the SME can make a more sensible choice.


Technological innovation is key

60% of SMEs in the UK buy their insurance policies online, meaning that insurers need to ensure that their online offering is up to scratch. Firms can do this by embracing the dynamic advancements in digitalisation and analytics that are revolutionising how businesses interact with insurers and providers. Embracing new technologies can set a firm apart from their competitors, so insurers need to allocate dedicated resources away from their primary business responsibilities.

Although short-term initiatives like updating existing products and maintaining systems may provide a sense of security, niche SMEs seek insurers who offer disruptive products to support them. Data analytics can be used to identify unmet needs and untapped markets to effectively cater to SMEs (such as offering coverage for digital assets or creating a virtual analogy of a product in the metaverse).


Niche is the new normal

Given that many SMEs find themselves in unfamiliar territory, still assessing their risks, insurers are in a unique position to embrace innovative technology and design products that directly address the needs of these businesses. This will empower them to cultivate enduring relationships with their specialised SME customer base throughout their entire business journey.


Strong partnerships have been integral to our success. We’re always open to explore new opportunities.


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