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By FintechOS · June 21, 2022
4 minute read

SME insurance: the future is customer-centric

The Future of SME Insurance is Customer Centric

SME insurance is key for small businesses. With the pandemic an ongoing concern, small- and medium-sized enterprises are cutting back on cover, even as they face an uncertain future. How can insurers better serve SMEs, and gain market share at the same time?

In 2020, the UK’s Financial Conduct Authority (FCA) identified 4,000 “predominantly small- and medium-sized” firms – the largest commercial segment in the UK – as having low levels of financial resilience and being at a heightened risk of failure following COVID-19 shocks.

Even ahead of the pandemic, SMEs’ need for external finance was estimated at EUR 400 billion (USD 481 billion) in Europe alone. SMEs account for 65% of the private-sector employment in the region).

Cash flow is vital for small businesses without extensive resources to back them up. Counter-intuitively, it’s those who lack cash reserves who need insurance most. Cutting back on insurance cover to save money is a sure recipe for disaster.

To counter this, SME insurers have kicked off digital initiatives to reduce customer churn. An Accenture report released in 2015 showed that customer disloyalty was costing insurance companies USD 470 billion across personal lines, life, and property and casualty, and only 29% of customers were happy with their current insurance provider – all long before the pandemic.

“Trust and transparency are more important than ever due to financial challenges that have emerged during the pandemic”, according to McKinsey, who ran a survey to track recent SME market trends.

Can such a vulnerable segment of customers turn into a profitable one?

The SME insurance market is under-served

“Carriers have a once-in-a-generation opportunity to make inroads in the SME segment with a refreshed set of propositions and a customer-centric approach”, McKinsey wrote last year, revealing that, these days, SMEs’ “top factor in selecting an insurance provider is getting [good value] from insurance products”.

As FintechOS showed in a previous article, the SME market is only now beginning to gain its rightful share of attention from the insurance industry. With radical changes in efficiency and scalability from digital transformation, and new segmentation and analytics capabilities provided by new technology, addressing the SME market becomes not only viable, but profitable.

Puneet Bharal 1567072442466 FintechOS

It all starts with the cultural mindset, whether it’s about product-building, selling, customer experience, data management, risk calculations, fraud prevention, innovation, or the business model itself, according to Puneet Bharal, Senior Presales Consultant at FintechOS. That means that the entire organization needs to embrace a holistic vision that places the customer at the very core of the business.

According to Puneet, customer-centricity “is a culture, not a project. To be successful, customer-centricity must pervade every action and decision in every department because every interaction with the customer, re-inforces what the company really thinks of the customer.”

Four key customer experience themes

Bharal has explored several examples of innovative plays in digital SME insurance – like Pikl, Flock, Floodflush and Zego – and picked out the key customer-centric features and design mindset, which established insurers can learn and apply in their own product innovation.

You can check out how a customer-centric business insurance can be designed around four key customer experience themes in the infographic below:

Four key CX themes

Customer centricity diagram

Let’s take Pikl’s innovative solution to serve SMEs in the facility industry as an example. The Sharing Economy has created a new set of entrepreneurs, with AirBnB being a huge success story, changing how people holiday and how homeowners and landlords let out their spare living spaces. “Pikl takes its understanding of its clients’ needs, their available time, and its insurance expertise, and has designed a simple offering in non-Insurance language to give its clients the protection they need,” Puneet Bharal explained.

Founded in 2016, Pikl claims to be the first specialist sharing economy underwriter in the UK nowadays.

Louise Birritteri, CEO & Founder, Pikl explained the reasoning behind Pikl’s customer centric business mindset in a FintechOS webinar, where she was a panelist. One of the golden rules of customer centricity done right, she said, is knowing your customer. “Understanding who they are, and their specific needs is key both from tje insurance product perspective, but also for how you guide them through your product journey”.

Flock is another example of nimble digital insurance, where the customer only pays for coverage when they’re flying their drone. Drones – which are an expensive piece of kit – are increasingly useful for various entrepreneurs like videographers, photographers, surveyors, or those working in the agriculture field. Therefore, Flock is serving its SME customers since commercial drone insurance is done by the hour, month, or year.

One thing is for sure, one-size-fits-all policies, with complex conditions and pricing dependent on bottlenecks of human advisors, and paper-based processes taking weeks to complete are 20th-Century approaches that are no longer competitive.

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