SMEs make up the vast majority of businesses worldwide. For example, 98% of the 5.6 million businesses in the United States employ fewer than 100 people. Enterprises employing fewer than 250 people are similarly a very important part of the EU economy, as they represent around 99% of all businesses.
In terms of supply and demand, these companies are more affected by financial crises than larger companies. They are also more vulnerable to demand-side shocks and can withstand crises only for a limited time. According to an OECD analysis, the pandemic had an above-average impact on sectors in which SMEs are particularly strongly represented, including the transport and production sectors of the construction industry, wholesale and retail trade, air transport, hotels and restaurants, the real estate sector and services with close personal contact (e.g. hairdressers). Companies that want to insure small and medium-sized enterprises should therefore keep an eye on increasing price sensitivity, the desire for more flexibility, and structural changes in the course of digitalisation.
Success factors for insurers
Business that distinguish between large commercial risks on the one hand, and small and micro enterprises on the other, can reduce the number of risk assessment questions, keep risk prevention requirements manageable, and simplify insurance terms and conditions.
The loss ratios of SMEs vary greatly depending on the type and size of the business. Two keys to success are offering needs-based products to the most attractive target groups and closely monitoring the portfolio.
Insurers can reduce the expenditure for advising, sales, subsequent administration, and claims handling by identifying the insurance needs of businesses and providing relevant cover that matches the customer's ability and willingness to pay as a standardised bundle of products to choose from.
At first glance, IT investments pay off more quickly in personal lines insurance. But the digitalisation gap in the commercial sector gives new, digital providers a considerable competitive advantage due to persistently high administrative costs in the industry. Reducing such costs with automated underwriting, simplified processes and self-service portals is the right approach to cope with the increasing price sensitivity of business owners. In addition, a higher degree of digitalisation enables products to be introduced to the market more quickly, as well as product and rate changes to be made at short notice.
In pure online direct sales, only a limited number of small business policies are sold; the existing products and processes are often complex and thus unsuitable for digital sales. What’s more, business owners tend to research insurance offerings and rates online, only to then seek personal advice before buying insurance. However, since even many agents do not know the insurance needs and the range of possible coverages in detail, it is important to make the offers and applications as clear and informative as possible – for example, by providing concrete examples of claims for various policies.
Finding new products together with customers
Step 1: Proof of concept
Market study: Based on our own data and external data, we identify the most attractive target groups and analyse their insurance needs.
Feasibility analysis: Based on our client’s existing IT infrastructure, we explain the various options available either in-house at Munich Re or externally.
Profitability analysis: Clarification of whether and from when the necessary investment is worthwhile, based on a jointly developed business case and business plan.
Step 2: Project phase
Product concept includes establishing coverages and packages that suit the client’s needs
Customer journey: Based on our prototype, we jointly create a customer journey that is tailored to the insurance needs of the selected target groups
Pricing: Preparation of the initial rate and setting up of a joint committee for rate and product control
Wording: Support in the drafting of the insurance conditions and underwriting guidelines
Support from external service providers in finding the right partner through Munich Re's partner network.
IT solutions for the rapid launch of an SME insurance policy
Digital transaction platform: Cloud-based platform with focus on automated underwriting designed for integration into an existing IT landscape.
E2E Insurance Suite: Cloud-based all-in-one system for the digital creation of an insurance quote, which also includes inventory management, claims processing - with invoicing and reporting features. It also includes a self-service portal for end customers and enables the operation of various sales channels, including direct sales via mobile devices. As a white-label solution, the customer can adapt it to their own brand environment.
With the help of our cloud-based platforms, our clients leverage the opportunities of digitalisation in a cost-effective way.
- Simple to understand and easy to use
- Lean processes and fully automated underwriting
- Client-centric by offering the right insurance package for each target group
- Examples of claims to illustrate the insurance need for the user
- Quick and easy implementation of changes to products and rates