Mind the Gap: The Potential of the Commercial SME Market for Insurers
The SMB market is often the largest and most critical in every economy, yet it has also been the hardest hit in terms of COVID-19 and the resulting global recession. In recent months, commercial insurance has faced challenging times; cities have emptied, commercial property’s value has fallen, and some SMEs have closed while others have seen revenues fall. This is despite government efforts to provide financial support.
Traditionally, the SME market has been underserved, with insurers looking for the big premiums available in the large commercial market or the mass market sway of the consumer market. In fact, the commercial insurance market still makes up only a small percentage of overall revenues. Yet many, including Sapiens, believe that the commercial SME market is prime for the taking, if only insurers can tailor their offering to meet the needs of this diverse market.
For insurers, helping small business owners overcome the perception that business insurance is too broad, too hard to understand, and cannot be trusted to cover them when they need it, is both the challenge and the opportunity. – KPMG
For insurers, 2020 led to a fiercely competitive environment in the commercial space as well as across most verticals. And while pricing and commercials have increased throughout 2020, insurers looking to contain risks often decreased their coverage. For example, business interruption insurance, which was so needed in 2020, has traditionally low penetration in the SME market.
Insurers must understand that the commercial SME market is as diverse as it comes. A ‘one size fits all’ solution to this market will not check all the boxes or meet the expectations. While some will want more general liability, others will look to business interruption, while some will need commercial property, others will need cyber. And the list goes on.
Moreover, customer expectations for seamless, digital products have risen due to our exposure to a variety of online applications. With these expectations heightened as a result of the Coronavirus. The commercial insurance market is no different. Novarica believes that for insurers embracing a ‘direct to consumer’ online model to target small medium enterprises, will benefit most. They believe the market will grow fourfold over the next 4 years.
Yet, as seen so often during the pandemic, technology is helping insurers deliver changes and new products to deal with this disrupted market, by leveraging some remarkable innovations to reduce cost, risk, prices and drive down fraud. For insurers that already have digital, cloud-based solutions implemented, the ability to be reactive in terms of delivering these products and services to customers has added genuine value to their investment.
Often times, the solution for the insurer is not found in one comprehensive core system. It requires coordinating a variety of moving parts by working with a solution that is:
- Digitally enabled whether designed this way, or can become enabled through a digital overlay
- Flexible enough to change as needs change, because nothing is set in stone, and insurers need to adapt as quickly as other industries
- Open, partner ecosystem so as to incorporate through an API layer, if needed, various third-party solutions that can provide value add to the process.
- Expandable and scalable as business grows and with the ability to cross over to other verticals and other sectors.
At a recent webinar, hosted by Instech London, a number of our ecosystem partners joined us to share how and why these ecosystem partnerships have emerged and what each of them can contribute to commercial insurers. An ecosystem which begins with reviewing and understanding gaps between customer needs and our scope.
In this case, we were joined by Cytora, Earnix and Friss. Sapiens’ three partners built a picture of how their own innovations have created efficiencies that deliver in the tough commercial market. How customer expectations can be met, and often exceeded, via a combined ecosystem as part of an end-to-end delivery solution.
Click here to watch the full panel conversation.