The report shows how the insurance market for small and medium sized enterprises (SMEs) is likely to transform to match the digital transformation seen in personal insurance over the past decade. Please read below for the full press release:
- Globally, 48% of small businesses who plan to switch insurance providers in the next five years say they want to do so online
- In South Africa, 34% of small businesses indicated they would prefer to buy their business insurance online
- 42% of small businesses in South Africa are likely to make the change to online purchasing within the next five years
- Just 16% of small businesses have cyber insurance and 18% do not have liability cover.
A growing number of small businesses say they are looking to interact with their insurers online, with 36% saying they will buy online in the near term, and 48% withinfive years.
These are the findings from a survey by Strategy&, PwC’s strategy consulting capability, of 2,100 small businesses from 14 countries across North America, Latin America, Asia, Europe and Africa. The survey shows how the insurance market for small and medium sized enterprises (SMEs) is likely to transform to match the digital transformation seen in personal insurance over the past decade. The insurance industry needs to act now to meet this growing demand from small businesses.
Victor Muguto, Insurance Leader for PwC Africa, says: “Digitisation is disrupting all sectors of the economy, and the insurance industry is no exception. Our global survey highlights that small businesses expect insurers to offer online products, and to add more digital services going forward.
“The insights of this study are both an opportunity and a challenge for the insurance industry. The survey findings uncovered a demand for digital insurance services that is not being met by the industry. Players in the insurance industry will have to develop a clear strategy on how to deliver products and services across multiple channels. They will need to understand the evolving needs of current and prospective clients better.”
At present, selling insurance to SMEs through digital channels is not straightforward. Many of the products they need are complex; products need tailoring to specific businesses; and SMEs want personalised advice before buying. Nonetheless, a number of specialised online services have emerged in countries such as the UK and Germany, and we’re seeing increasing activity in this space in South Africa from direct-to-consumer (D2C) insurers
Jorge Camarate, Strategy& Partner adds: “Our study confirms that there is an unmet demand for digital insurance services – it is an opportunity for insurers to completely rethink the product and service offering and adapt the operating model to take full advantage.” For those who are well prepared, a lucrative new market awaits.
Other key findings
Recently founded companies are more likely to interact with the insurance industry online. Less than half (48%) of small companies under one year old, and 42% of those 4-5 years old, say they want to purchase business insurance online, This drops to 37% of more established companies aged over ten years, who tend to have deeper relationships with brokers and agent. Existing relationships with brokers/agents (44%) and the need for expert advice (38%) were the top reasons for not buying online.
Experience with buying personal insurance is the single biggest predictor of how a business wants to purchase its business insurance. More than half (59%) of those who bought their personal insurance online also purchased their most recent business insurance online. There were differences from country to country, with UK business owners most likely to buy both their personal and business insurance online, and Swiss business the least likely. In South Africa, 20% of small business purchased their most recent business insurance online, and 50% purchased it face-to-face.
Globally, 70% of owners who purchased their personal insurance online stated they would like to purchase their business insurance online in the future. In South Africa, 34% of small businesses indicated they would prefer to buy their business insurance online; while 42% of businesses are likely to make the change to online purchasingwithin the next five years. These findings are consistent with the recent growth of D2C personal insurance in South Africa championed by the likes of OUTsurance and MiWay, and its expected impact on the adjacent business insurance market.
The findings also reveal that many small business are often unknowingly underinsured, leaving them vulnerable to paying out large sums in claims and legal costs if an incident occurs. For example, across the globe cyber cover for small businesses is extremely low, with just 16% of global firms saying they currently have cyberinsurance, despite an additional 46% acknowledging it could be applicable for their businesses.
In addition, just under a fifth (18%) of global small businesses do not have liability insurance, and only half have indemnity insurance.
Camarate adds: “Regardless of size, age, sector or location, the way small businesses acquire insurance services is expected to change in the near future. The question for insurers is how they intend to adapt to keep with the evolving preferences and expectations of their clients.
“Insurers must have the capabilities to understand their customers and rapidly adapt solutions as the market changes. They should also look at an emerging generation of startups not just as customers but as potential partners in providing new technology and value-added services, creating more responsive, targeted solutions.”