Some thoughts here from Andy Brownsell, Commercial Director at Starpeak, on how SMEs can weather the recession ahead – and insurance brands can support them.
Small and Medium Enterprises (SMEs) in the UK, are predicted to see a 15% growth in revenue in 2024, leading to this group contributing £2.3 trillion to the UK economy over the next year. Given the pivotal role that SMEs play in the success of the UK economy, it’s important that they’re supported – whether it’s from a government, technological and arguably most importantly, an insurance perspective.
This is particularly important during times of economic uncertainty. The latest ONS figures show that the economy shrank 0.3% between October and December 2023. This followed a 0.1% fall between July and September, meaning that the economy went into recession at the end of 2023.
While we’re starting to see things go in the right direction, the recession has placed pressure on everyone. Smaller businesses tend to be more vulnerable given their lack of scale and increased risk of failure in a downturn. While many small businesses have and are rightly focused on reducing risk, they are also looking to the future. Now is the time to help them to recover and rebuild.
The landscape for SMEs has been altered by the COVID-19 pandemic and recession, leading to a shift in how they operate and interact with insurance providers. While there may be signs of improvement, it’s crucial for SMEs to receive the necessary support to navigate this volatile market confidently. Insurance providers have an opportunity to capture more of the SME market by focusing on different segments, developing new products, educating and helping customers navigate things they may not even know they need, such as liability insurance, as well as rethinking customer journeys. So how exactly can this be achieved?
Crafting personalised customer journeys
Over three quarters (78%) of small enterprises say success hinges on the UK’s economic performance, specifically avoiding a recession. With the latest ONS figures showing a contraction in the UK economy at the year’s end, this is expected to dampen the confidence among small businesses. This underscores the importance of insurance providers personalising their products to assist customers in coping with such economic challenges.
SMEs come in all shapes and sizes and cater to a variety of consumers across sectors in the UK during these challenges times. This means that a one-size-fits-all approach when it comes to insurance will not work. Insurance providers need to get creative to meet the needs of this fast-growing group, particularly when businesses are concerned about where money is being spent.
This is where using data and analytics can help insurance providers effectively reach the SME market and provide a variety of products to suit all businesses’ needs and preferences and provide options to suit each business’s budget. With data-driven analytics, insurance providers have better access to historical data, including preferences, significant events and past issues that can be used to ensure strong personalised recommendations. This not only serves the customer’s benefit, sparing them the need to repeat their request if their case is transferred within the company, but also aids the insurer
For example, if an SME has previously insured their events business with an insurer, retaining the details of their policy along with any specific requirements they’ve previously communicated enables insurance providers to tailor their approach when providing a quote for policy renewal. The data being collected can also be analysed to inform future innovations of the products and policies that insurance providers are developing, refining their offering for SMEs over time. Feedback from customers, market trends and historical data can also be used to inform and optimise existing products and services. This level of hyper-personalization not only fosters enduring customer relationships but also positions insurance providers as empathetic partners who understand the needs and challenges faced by SMEs during economic downturns.
The role of product innovation
Recessions typically spur a surge in the emergence of new SMEs in the market. As budget cuts often translate to job cuts, people are motivated to pursue their passions and establish the businesses that they have envisioned.
Data and analytics have always played a major role in the insurance industry, but as new technologies emerge, and data is more readily available, insurance providers need to decide how best to leverage this.
While access to real-time data and analytics has quickly become something that helps insurance providers stand out from competitors, they must also be well-prepared to truly capitalise on the opportunities that digital transformation initiatives can deliver. Insurance providers who embrace new technology and use this to diversify their offering for an SME customer base, are the insurers who will stand out.
Amidst a decline in economic activity, SMEs grapple to maintain stability, insurance providers face heightened pressure to increase their chances of retaining customers and secure future business opportunities. The economic slowdown has fundamentally altered the way that SMEs prefer to engage with insurance providers, and this has important growth potential for providers. By targeting diverse segments, developing new products and rethinking customer journeys, insurance providers can deliver tailored high-quality support in a challenging economic environment.
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