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SME insurance: An attractive market with growth potential
SME insurance: An attractive market with growth potential
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    Small and medium-sized enterprises (SMEs) play an essential role in the global economy, yet they are also vulnerable and less resilient to a global crisis such as the COVID-19 pandemic. It can therefore be challenging to predict the resilience of SMEs. With this in mind, insurers should know which risks they can insure in this market and how to make the best use of their business opportunities.

    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. 

    US businesses ranked by number of employees

    Success factors for insurers

    UW approach

    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.

    Client centricity

    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

    Together with its insurance industry clients, Munich Re develops insurance solutions specifically tailored to SMEs. The industry’s low level of digitalisation in this segment will be further advanced in this way, which will benefit insurers and SMEs alike. We offer our clients the opportunity to integrate their requirements directly into the product development process. Depending on individual needs, they can choose from predefined consulting services and IT components. This means that we can enable our clients to jointly bring a new insurance solution to the market within six months. How do we go about this?

    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.

    E2E Insurance Suite enables direct sales of SME insurances via mobile devices
    E2E Insurance Suite enables direct sales of SME insurances via mobile devices
    © Munich Re

    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

    Benefit from tailor-made SME solutions

    Irrespective of size, age, industry, or location, the way small businesses acquire insurance services is likely to change in the near future. Accordingly, insurers should adapt to their clients’ new requirements and changing expectations. That is where Munich Re steps in with its proficiency and expertise to provide tailored solutions for you and your clients.
    Our experts
    Christian Hell
    Christian Hell
    Engagement Manager
    Global Consulting


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