The future of small business insurance

Rather than harming trust in insurers, COVID has strengthened it. In total, 99% of Swiss SMEs trust their insurer or intermediary as much or more than before the pandemic. The level of trust has risen despite negative Swiss press coverage of delays in insurer payments in response to business interruption claims.

The main reasons for the increase in trust were offers by insurers or intermediaries of additional services to help with difficulties (such as, for example, financial advice), payment of some claims as a gesture of goodwill, accelerating the payment of claims, and temporary premium discounts.

International observations

The same trend can be observed across almost all other countries examined by the global survey. Those that reported a deterioration in trust cited a lack of support during the pandemic or not being covered as expected.

An exception is Norway, where only 64% of SMEs said they trust their insurer/intermediary. This is perhaps explained by the fact that 90% of SMEs surveyed in Norway reported that they had “tried” to make an insurance claim since the pandemic began, compared with 70% across the other countries.

Post-COVID, SMEs are more aware of their risks and vulnerabilities and are likely to increase their insurance spending. The survey shows that even in a mature market like Switzerland, 53% of Swiss SMEs are expecting to spend more on business insurance in the near future. However, 39% of SMEs also expect to decrease their insurance spending, which leaves a 14% net change in purchase likelihood.

International observations
SMEs in less mature markets are planning to increase their spend on insurance even more, with a net 26% of SMEs expecting to spend more on business insurance in the near future.

The events of recent years have demonstrated to Swiss SMEs the potential impact of systemic risks and other potential “black swan” events. This has changed their preferences for the new types of coverage they may be looking to add to their portfolios. In Switzerland, 34% of SMEs indicated that they would like to add protection from systemic risks to their portfolios, followed by cover for professional liability (31%), and - surprisingly - earthquake damage (25%).

At the same time, there is still strong demand for more traditional insurance coverage which retains its relevance in a changing world. Interestingly, climate change, another globally discussed topic in 2021, did not appear among the top risks most sought out by Swiss SMEs, with only 18% of those who are not covered at present expressing interest in adding coverage against the risk.

International observations
Compared to other countries, Swiss SMEs are less interested in adding additional coverage against future pandemics and they prefer to focus on systemic risks and professional liability.

The majority (2/3) of SMEs would like to be able to obtain information via online channels. Many Swiss SMEs are open to buying more insurance online - more than their peers in other countries (23% global average vs 36% in CH).

While face-to-face meetings are important, there is also growing interest in buying insurance over intermediaries’ websites.

The survey reveals that, contrary to conventional wisdom, the likelihood of an SME shifting to digital channels in the future is strongly influenced by the characteristics of the insurance purchaser and primarily driven by age, not the industry or size of the business. Younger purchasers are more likely to use digital channels.

A similar pattern emerges when looking at how long the purchaser has held business insurance. Adoption rates for digital engagement are higher among those who are less experienced or newer to the industry. There is minimal variation between industrial sectors in SMEs’ use of websites for insurance transactions.

International observations
Of all the surveyed countries, Switzerland indicated the greatest desire for digital purchasing in the future.

SMEs want the human touch. When they change their business insurance they prefer to interact in a personal conversation, face-to-face or by telephone.

SMEs prefer working with their intermediaries (rather than directly with insurers) when making a change to their policy or making a claim. The results are similar for making a change to cover and making a claim.

International observations
However, Swiss SMEs are more open to switching to websites than their peers in other countries when changing their business insurance or making a claim.

Remarkably 87% of Swiss SMEs would prefer to update their insurance coverage through the year – for example, increasing or decreasing coverage based on changes in revenue, the number of employees, or other unexpected business changes. Most SMEs would prefer to add coverage (52%) and avoid the risk of not being covered (45%). Paying less was not among their main motivations (32%).

80% of SMEs in Switzerland would like to pay for insurance via a variable monthly fee based on usage (e.g., miles driven, number of customers, etc.), making cost savings possible, though factors such as appropriate coverage and trust are deemed to be more important than price.

International observations
Compared to other countries in the survey, both flexible coverage and usage-based insurance are of greater importance to Swiss SMEs (+12 percentage points) than to the average of respondents in other countries.