Online channels are having a significant impact on the way Australian small businesses buy insurance, with those using brokers declining, according to the latest Vero SME Insurance Index. Digital disruption is firmly here and brokerages, as well as the broader industry, need to develop strategies to adapt to this new reality.
Now in its sixth year, the Vero SME Insurance Index has grown to become a key resource for brokers looking to remain relevant and to retain and grow their presence in the SME market.
There were a number of noteworthy findings that pinpoint where brokers should concentrate their strategy to prove their value as trusted insurance advisers to clients and to grow their client base and revenue streams. More than 1500 small business owners were surveyed nationally in October 2016 for the Vero SME Insurance Index and the findings are being released in four tranches over 2017.
“There’s never been a more important time to explain to SMEs the value brokers can bring to their businesses,” Vero’s Head of Commercial Intermediaries, Anthony Pagano, said.
“However, with change comes opportunity and the brokers who understand the risks, develop appropriate strategies and embrace the prospect of change, will be those who will seize these opportunities and thrive in years to come.”
Majority of SME business owners don't recognise the value of an Insurance Broker. #verosmeindex
— Gemma Gould (@BreakThruIn2) March 20, 2017
The survey found the proportion of SMEs who bought their insurance policy through a broker, decreased from 40% in 2013 to 31% in 2016. At the same time, the numbers of SMEs who bought their last insurance policy online increased from 20% in 2013 to 27% in the latest survey.
“It’s concerning that a growing number of SMEs are seeking advice from peers, meaning they are making complex insurance and risk management decisions with no trained, professional input to guide them,” Pagano said.
The Index showed the number of SMEs that seek professional advice, such as accountants, lawyers, business advisers and industry bodies, as well as insurance brokers and insurance companies had fallen from 84% in 2015 to 79% in the latest survey. Respondents who indicated they receive advice from peers such as family, friends, colleagues and other business owners, increased from 46% to 52%.
“There is no silver bullet solution, but current best practice suggests brokers who develop proactive strategies to embrace change will be the ones best equipped to grow and thrive,” Pagano said.
There were two key strategies for brokerages to consider: embrace and integrate digital capabilities; and reinforce the unique benefits they bring to customers.
“The good news is that broker clients who get advice from their broker are significantly more satisfied than those who don’t and are more likely to see greater benefits of working with a broker.
“Advice can be a valuable way of demonstrating expertise and to be most effective, it needs to be tailored to suit the clients’ size and needs.
“Brokers could consider a more collaborative approach to delivering advice to some clients, so that these SMEs feel more involved in the process.”