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Market Research Report

UK SME Insurance: Market Dynamics and Opportunities 2017

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Published Content info 49 Pages
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UK SME Insurance: Market Dynamics and Opportunities 2017
Published: October 11, 2017 Content info: 49 Pages
Description

After recording a growth every year since 2012, the United Kingdom SME insurance market suffered a sharp decline in 2016. The market was worth £6.4bn in GWP in 2016, down 9.0% year-on-year. This was caused by tough economic conditions and an uncertainty surrounding the Brexit, which led to increased liquidations, reduced growth in the number of businesses open, and SMEs spending less on insurance.

Declines in the number of businesses and insurance spend for companies with between five and nine employees has been particularly damaging. The number of companies in this size category fell by 4.1%, which is considerable as there are a large number of them and they have a high insurance penetration rate. Total SME insurance spend fell by 22.7% on the previous year, which makes up £300m of the £630m insurance spending.

Critical success factors

  • Cracking the cyber market - SMEs are increasingly worried about the impact of a cyber-attack and insurers are creating more and more policies, yet penetration has declined. A lack of specialist cyber knowledge and too much focus on pricing are seen as the main issues within the industry. It is also believed than many SMEs are taking the optimistic view that a cyber-attack will not happen to them, so the insurers need to convince them of the benefits of insurance. In time, cyber policies could become an essential product for SMEs.
  • Need for more tech - The personal lines space has left commercial lines a little behind on investment in insurtech. While SME insurance may not be the easiest space to introduce technology such as automation into, due to customers' need for advice, more can be done to connect with clients. Industry insiders have told us they are very much focused on evolving towards preventative services, interacting with customers on a regular basis and helping to stop claims before they happen. Technology such as sensors for fires and leaks are becoming commonplace in home insurance, and could be invaluable to both customer and insurer in the SME market.

The report "UK SME Insurance: Market Dynamics and Opportunities 2017" analyze the UK SME insurance market. Economic factors including GDP growth, SME business confidence, and unemployment rates are explored in relation to the UK's business landscape. Growth in the number of SMEs is explored by business size and industry. The SME market is discussed in relation to uptake of commercial insurance. Finally an estimate of current and historic market size is provided, in addition to a future forecast.

Companies mentioned in this report: AXA, Aviva, NFU Mutual, Allianz, Direct Line, Hiscox, Zurich, AA

Scope

  • Micro businesses account for 95.5% of UK private sector enterprises and 18.6% of generated turnover.
  • 40.0% of SMEs are concerned about the fallout from Brexit, with the possibility of poorer economic conditions the key factor.
  • The UK SME insurance market is forecast to be worth £7.66bn in 2020.

Reasons to buy

  • Be aware of the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy.
  • Adapt your strategy and ensure you remain competitive by understanding the opportunities for growth within the SME insurance market.
  • Recognize the challenges the SME insurance market faces.
  • See our forecasts for the SME market.
Table of Contents
Product Code: FS0068IA

Table of Contents

Table of Contents

  • 1. EXECUTIVE SUMMARY 2
  • 1.1. The SME insurance market stalled due to tough economic conditions 2
  • 1.2. Key findings 2
  • 1.3. Critical success factors 2
  • 2. SME MARKET 7
  • 2.1. Introduction 7
  • 2.2. UK economic growth remains stagnant 7
  • 2.2.1. The UK economy is extremely dependent on the service industry 10
  • 2.2.2. The number of company liquidations increased for the first time since 2011 12
  • 2.2.3. Economic conditions are hurting small businesses 14
  • 2.2.4. There was a 6.2% annual increase in the number of companies registered in 2016-17 15
  • 2.2.5. Small business confidence collapsed in Q3 2017 after a strong start to the year 17
  • 2.2.6. UK unemployment continues to fall 20
  • 3. SME INSURANCE 22
  • 3.1. The SME space offers opportunities for growth if underinsurance levels and micro enterprise targeting can be improved 22
  • 3.1.1. The number of UK SMEs continues to grow, driven by micro enterprises 22
  • 3.1.2. The UK SME insurance market fell by 9.0% to £6.4bn in 2016 23
  • 3.1.3. Underinsurance remains a critical issue for the SME space 26
  • 3.1.4. A retention-heavy market makes for tough conditions 30
  • 3.2. Construction dominates the SME market by business numbers, while by turnover retail remains key 30
  • 3.2.1. The wholesale and retail sector dominates the SME market by turnover 31
  • 3.3. Public liability is the most commonly held cover among SMEs, while uptake of cyber insurance has stalled 32
  • 3.3.1. Insurance product penetration varies by SME industry, but public liability dominates 34
  • 3.4. The potential impact of Brexit is front of mind for many SMEs 39
  • 3.4.1. SMEs are most concerned about the effects of cybercrime and Brexit 39
  • 4. THE MARKET GOING FORWARD 43
  • 4.1. Insurtech is yet to make much impact in the SME insurance space 43
  • 4.1.1. Commercial insurers face a number of opportunities in the digital transformation of insurance 43
  • 4.1.2. Social media is becoming important for SMEs 44
  • 4.2. Details of Brexit deal 45
  • 4.2.1. Barriers to trade and access to talent are SMEs' main concerns regarding Brexit negotiations 45
  • 4.2.2. If free movement is restricted the UK could see a shortage of skilled workers 45
  • 4.2.3. Business profits are likely to fall if household disposable income is squeezed 46
  • 4.3. SMEs tightening spending and Brexit will drive a flat insurance market over the next few years 46
  • 5. APPENDIX 48
  • 5.1. Abbreviations and acronyms 48
  • 5.2. Bibliography 48

List of Tables

List of Tables

  • Table 1: UK GDP growth by quarter (%), 2009-17 10
  • Table 2: Annual GDP of UK economic components, 2013-16 12
  • Table 3: Number of companies registered in the UK, 2011-17 17
  • Table 4: Small Business Confidence Index, 2010-17 19
  • Table 5: Number of SMEs in the UK private sector, by business size, 2009-16 23
  • Table 6: UK SME GWP and annual growth, 2012-16 25
  • Table 7: UK private enterprise volume, employment, employees, and turnover by business size, 2016 28
  • Table 8: Insurance penetration among SMEs surveyed (%), 2015-17 34
  • Table 9: Insurance penetration among surveyed SMEs, by industry, 2016 36
  • Table 10: Concerns of SMEs (%), 2017 42
  • Table 11: UK SME insurance market GWP forecast (£m), 2012-20f 47

List of Figures

List of Figures

  • Figure 1: UK GDP has grown for 18 consecutive quarters since Q4 2012 9
  • Figure 2: The services and agriculture sectors are driving UK economic growth 11
  • Figure 3: Liquidations rose in 2016 after years of declines 13
  • Figure 4: There was a sharp increase in liquidations at the end of 2016 14
  • Figure 5: The number of registered companies continues to grow 16
  • Figure 6: Small business confidence has plummeted after a strong start to 2017 18
  • Figure 7: Many sectors have seen a substantial change in business confidence 20
  • Figure 8: The UK's unemployment rate continues to fall 21
  • Figure 9: SME market GWP fell by 9.0% in 2016 24
  • Figure 10: Micro enterprises account for 61% of SME market GWP 26
  • Figure 11: Micro enterprises make up 95.5% of private businesses 29
  • Figure 12: From 2013 companies of all sizes have grown in number each year 30
  • Figure 13: Construction continues to dominate SME segments by turnover 31
  • Figure 14: Wholesale and retail industry continues to dominate SME segments by turnover 32
  • Figure 15: Public liability is the most commonly purchased product 37
  • Figure 16: Penetration is consistently higher for larger companies 38
  • Figure 17: Public liability leads the way for SMEs 39
  • Figure 18: SMEs are most concerned about Brexit and cybercrime 41
  • Figure 19: Larger companies are more likely to use social media, with Facebook leading the way 44
  • Figure 20: The SME insurance market is set to surpass 2015 figures in 2020 47
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