SME business insights – the challenges ahead


Last month, Vero released its annual SME Insurance Index, which quizzed more than 1750 business owners across Australia about how they perceive insurance, and the role of brokers, too.

Here are some of the key themes that emerged from this year’s research.

The possibility of underinsurance is increasing

With inflation continuing to rise, it’s somewhat predictable that the possibility of underinsurance is growing too. However, while the cost of replacement goods and services increased significantly, only 29 per cent of businesses surveyed said they’d considered increasing replacement costs1. It’s a good idea to review the cost of replacing goods – as well as property – every year or so anyway. When we’re living through a period of dramatically rising costs, it makes sense to ensure that insured values are at today’s rates.

Economy creates new challenges for businesses

The economic challenges facing businesses are a huge cause for concern across the board for SMEs, with increasing costs (36 per cent), the economic downturn (25 per cent), managing cash flow (21 per cent) and sourcing financial capital (16 per cent), particularly prominent2. Fifty-one per cent of businesses saw a decline in turnover3, which prompted businesses to make changes to their insurance policies. Eleven per cent of businesses increased their excess, while 9 per cent changed the frequency of their premium payments, and 9 per cent pushed back on their broker to get a better deal. Nine per cent reduced sums insured, while 8 per cent removed elements from their policies, and 8 per cent cancelled some insurance. Eight per cent changed broker in search of a better deal, while 7 per cent moved to a direct insurer.4 These figures underline just how important it is for brokers to be proactive around client retention, helping clients save money if possible by restructuring their policies, and ensuring they understand the value of both the insurance they hold and the value that comes from working with a broker.

Most businesses don’t think about insurance when making changes

It is understandable. After all, if you’re buying new premises, investing in new machinery or goods, buying another company or making any other business changes, insurance doesn’t necessarily come out on top of the list of things to consider. But, just as you’d speak with your accountant, mortgage broker and real estate agent if you were buying new premises, you should speak with your insurance broker early in the piece, too. Why? Because they could advise you, for example, about flood risk, and associated insurance costs. If you’re planning to restructure the company, or introduce a new service line, for example, you could be introducing new risks that could impact the financial viability. However, 41 per cent of businesses Vero surveyed admitted that insurance was the last thing they considered when making business changes5.

Broker satisfaction high among clients

Client satisfaction is always an important metric for brokers, and this year’s Vero SME Index shows that client satisfaction levels have remained incredibly high. 78 per cent of clients6 reported they were satisfied with their broker – a small decrease from last year’s 84 per cent but a significant increase on the 60 per cent of 2021. The 84 per cent scored in the 2022 survey was thought to be a reflection of the unusual conditions created by COVID-19, however, it seems brokers have maintained the relationships and satisfaction levels that helped clients navigate through the pandemic. The value of the broker proposition is increasing in perception for direct insurance buyers too, with just 20 per cent7 saying they won’t consider working with a broker, down from last year’s 27 per cent.

Businesses that use brokers report more satisfaction come claims time

It’s a common saying in insurance, but it’s true: you only ever know the true value of insurance – or how good your policy is – when it comes time to claim. The claims process, particularly at the time of a major event, can be stressful, and if a business isn’t working with a broker, you have to manage the claims process yourself. When working with a broker, businesses have an advocate, who will manage the claim and ‘go into bat’ for you should the need arise. It’s no surprise then that broker clients reported 20 per cent higher satisfaction at claims time8, and also reported a higher claims payout ratio to their direct counterparts –55 per cent recovering 51 per cent to 100 per cent of losses compared to 38 per cent of businesses that went direct9.

Businesses need the help that brokers can provide

Businesses surveyed by Vero identified a number of areas they find challenging when it comes to insurance – and brokers can help. Policy wording details were rated as complex by 60 per cent of those surveyed, while responsibilities as an employer were challenging for 51 per cent. Claims paperwork, understanding the risks that were covered by a policy, and legislation changes were among the areas that around half of those surveyed found difficult. Brokers can help navigate businesses through these complexities, and increase your understanding at the same time10.

Final thought – the value of a good broker

Over the past few years, businesses have dealt with a lot of change, and an awful lot of turmoil. From COVID-19 to the inflationary environment we’re currently navigating, the challenges rarely stop. Ensuring you have the right coverage in place provides certainty in the most uncertain of times, and your insurance broker should be a strategic partner and advocate. By working with an insurance broker, you can get additional help and insight into helping your business thrive – and be able to sleep more soundly at night knowing that if the worst happens, you have a strong safety net in place.

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