Mixing it up SMEs are increasingly buying some insurance direct and some through brokers, Vero’s latest Index report shows. Here’s why By Wendy Pugh
T
he percentage of SMEs buying almost all of their insurance through brokers is falling. So what’s driving businesses to mix up their purchasing? And should advisers see the trend as a worrying challenge? Vero’s SME Insurance Index has revealed many changes in the relationship between brokers and their clients over its 11-year history, and the latest edition is no different. Key findings from this year’s Index, which involved an extensive nationwide survey of 1500 SMEs, show only 14% of the companies surveyed bought “almost all” of their insurance through a broker. That’s down from 27% last year. The drop mainly reflects an increase in those using a mix of channels, rather than a surge in SME owners and managers not using a broker at all. Vero says the mixed usage growth can be seen across all types of businesses, and is particularly high among those where at least five people work at a firm. “Mixed purchasing appears to be the norm for these small and medium-sized businesses, which raises the question: are brokers comfortable with this mix, and does this decline in brokers’ share of overall insurance coverage matter?” the report says. SMEs tend to nominate ease as the main reason for buying direct, while price is also important. The reasons for businesses choosing a particular channel, the services they value and their levels of satisfaction are explored throughout the survey. “You don’t generally wake up in the morning, saying to yourself, today is a good day to buy insurance,” Vero Head of Commercial Intermediaries Anthony Pagano tells Insurance News. “We had to ask
22 insuranceNEWS
April/May 2022
Figure 1.1: % of policies bought through a broker % of policies bought through a broker 2018
31%
2019
24%
2020
24%
2021
42%
61%
15%
51%
29%
2022
27%
25%
44%
32%
27%
54%
Non users
14%
Light to moderate users
Heavy users
Figure 1.6: Reasons not to use a broker for their last or most important policy
Reasons not to use a broker for their last or most important policy 40%
46% 33%
30%
31%
34% 21
%
I can do it easily enough myself
It would be more expensive to go through a broker
I don’t want to deal with a middle person / rather do it directly
Direct buyers who still use a broker for some policies
ourselves, why are SMEs purchasing differently at different points of their business lifecycle?” The answer is simple enough. Businesses are buying direct in areas they see as more straightforward, with technology smoothing the process. Fair enough, but Mr Pagano notes SMEs
22%
I think they are more likely to recommend a policy that offers them the biggest commission
27% 19%
I don’t see the benefit in using a broker
Total direct buyers
are often unaware of exposure gaps or pitfalls that may impact an enterprise, no matter how simple it may seem. Policies less likely to be purchased through a broker compared to two years ago include commercial property, machinery and equipment breakdown, workers’ compensation and commercial motor.
