Being seen to be at war with your policy-holders is not a good look when it comes to client relationships and customer experience. Yet that is exactly where the insurance industry has found itself in terms of media coverage and industry perception over its response to the pandemic, particularly with SMEs.
Lurid banner headlines have proliferated across the mainstream and trade press. “Insurers vs Small Businesses: A High-Stakes Battle Over Lockdowns” was a typical example from the Financial Times in June. The prevailing sense was summed up by one frustrated SME boss quoted in a prominent insurance trade magazine: "Many businesses feel betrayed by insurers… and they're losing faith in the industry.”
No one would deny that the pandemic has stress-tested the industry but, in these days of 'fake news', it has become best practice to carefully fact-check stories and separate hype from reality.
In fact, the ABI claim that over £1.2bn will be paid in claims (working estimate), £900m of it on Business Interruption. See here for the full release.
Deloitte surveyed the SME community to understand their views of insurers and brokers from COVID-19. Unsurprisingly, the results reveal areas where insurers and brokers may need to raise their game, especially in terms of proactive response and support for beleaguered customers.
But the real takeaway, and the headline news, was that claim payment issues have been much less impactful than the press coverage seems to indicate. Better still, the level of trust in insurers among SME clients remains surprisingly high and has even increased since lockdown was announced in late March.
In classic Fleet Street fashion, let’s examine the downsides first before moving on to those areas of opportunity.
The engagement’s off
Certainly, the lack of engagement by insurers is disturbing. Their SME customers’ businesses have been disrupted by the pandemic, but many *they* have not bothered getting in touch with the majority of them. They must go above and beyond that. Even when they did contact customers, it was to talk about issues that mattered to the insurers and their own internal agendas.
A total of 60% of SMEs reported that they had received no contact from their insurers or brokers during the course of COVID-19 outbreak. Those that were lucky enough to be contacted said that, in the majority of cases, communication had simply taken the form of generic industry updates or information about the insurers or brokers own operations. It was rarely on the challenges that the SMEs were facing.
For that minority that were contacted, 28% were offered advice, 31% were told about their coverage, while help with premium payments accounted for just 8%.
Given this apparent failure to engage, many SMEs may question what value their broker is providing and considering changing or going direct. Some will be frustrated why they were not advised by their broker that their policy didn’t cover COVID-19 related incidents or weren’t recommended a different policy.
Our survey also gives clarity around exactly how the pandemic has affected the SME sector. More that 60% of businesses said they were materially affected by COVID-19. More than half had moved to working from home while more than a third have lost revenues. Four in ten had been obliged to furlough staff or lay them off while a third had been forced to close partially or temporarily.
Given this level of distress, there is clearly a wake-up call here for the industry which must challenge itself on how it helps business customers. There is little doubt that the pandemic crisis has exposed certain operational shortcomings. Must do better is the comment on the report card.
However, our survey also revealed key strengths and opportunities. The number of claims made was actually considerably lower than the volumes suggested by the coverage. In fact, fewer than one in five businesses made a claim of any kind and just 12% of SMEs made a claim that was related to business interruption arising from COVID-19. The impact on the industry is far from being the tsunami of popular imagination.
Trust is not bust
Encouragingly, despite that negative press coverage of insurance industries response to COVID-19, the majority of SME still trust their insurers and brokers. More than three-quarters of SMEs reported that their level of trust in their insurer or broker remained the same post-COVID 19. For a significant minority, about one in six, the level of trust actually went up.
While this finding is apparently good news, it is also something of a back-handed compliment - it implies that SME expectations of their insurers were not particularly high to begin with and that the bar has been set rather low in terms of customer experience. Insurers may wish to consider the implications for their client engagement strategies during the pandemic and in its aftermath.
In this blog we’ve examined the SME sector’s perceptions of the insurance industry’s response to COVID-19, understanding what needs to improve and what the areas of strength are. The next blog in this series will examine how these experiences of the COVID-19 impact have influenced and shaped the SME sector’s views on insurance moving forward.
Get in touch to find out how your organisation can thrive in the post-pandemic SME insurance marketplace