The UK SME insurance market was estimated to have been worth GBP10.9 billion in 2021 and is expected to grow at a CAGR of more than 4% during the forecast period. Premiums hardened considerably in 2020 and 2021, which was the sole reason for such strong premium growth. Insurers were unable to grow the volume of policies, as SME numbers declined, and penetration rates fell across most product lines. Although SME numbers rose in 2020, a notable proportion were using the furlough scheme and were therefore unlikely to renew policies.

The UK SME insurance market report sizes the market in 2021 and forecasts future gross written premiums until 2025. It analyzes the macroeconomic factors that influence the space. The report also uses our UK SME Insurance Survey data to analyze SMEs’ attitudes to insurance and the key factors impacting the market in 2021 and beyond.

UK SME insurance market overview

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What are the market dynamics in the SME insurance industry in the UK?

The threat of a cyberattack is an increasing concern for SMEs. This trend has only accelerated since the pandemic. Yet cyber insurance penetration remains low and is only growing slowly. There is a great opportunity for insurers to set themselves apart as experts in this field and convince SMEs they can provide cyber insurance that is worthwhile, despite being expensive due to the nature of the risk.

Digitalization is a long-running theme in all forms of insurance and will become especially important post-COVID-19. Most insurers are making efforts to modernize their services by utilizing technology, as doing so is now essential to compete. When used well, AI and automation can set insurers apart. Profit margins are extremely tight in SME insurance, and these technologies can allow insurers to automate various parts of the insurance value chain to reduce operational costs. This will in turn allow them to keep premiums competitive at a time when they are being pushed higher and higher. When used effectively it can also save customers time and provide 24/7 services, so it is something insurers and brokers should be investing in.

Pay-as-you-go insurance has been a key trend in both the commercial and personal lines in recent years, and it is especially valuable to customers during times of uncertainty. Startups such as Zego have made names for themselves in the micro enterprise space by offering flexible, digital policies to tradespeople and delivery drivers, for example. Easy-to-use and cheap policies that allow sole traders to switch cover off when they are unable to work could be a good way for insurers to increase their policy volumes at a time when new business is hard to come by. It is an area insurtechs such as Zego have led in – and traditional insurers need to catch up.

What was the impact of COVID-19 on the SME market in the UK?

The SME insurance market registered strong growth in 2020 in the UK. The impact of the pandemic on SMEs and on SME insurance was undoubtedly enormous. It was also very varied across different products. Lines such as liabilities, tradesman’s insurance, and shop and office insurance struggled a great deal throughout 2020, with some renewals that would have come up during lockdown periods being postponed until they became necessary again. Primary research indicates that one of the starkest knock-on effects of lockdowns was renewal dates changing, meaning the typical seasonality has disappeared for now. Traditionally, March and September are particularly busy months for insurers with renewals, but this is up in the air for now as so many renewal dates have changed over the past couple of years. This makes the market even harder to predict for insurers. However, the pandemic will also have highlighted the importance of having certain cover in place, such as business insurance, directors and officers, key man, and private medical insurance, which is likely to see take-up of such products improve going forward.

Meanwhile, cybercrime has been a hot topic since the pandemic started, with fraudsters increasingly targeting people who are away from offices and potentially more vulnerable to scam emails. There have been regular news stories of cyberattacks and increased phishing attempts, with the National Cyber Security Centre stating there were more online scams attempted in the year to May 2021 than in the previous three years combined. In addition, scams removed from the internet increased 15-fold. Yet SMEs are still not overly concerned about the cyber threat they face, with majority of the respondents either not concerned at all or neither concerned nor unconcerned. But SMEs do recognize that the threat of cyberattacks has increased since COVID-19 and are more likely to purchase cyber insurance as a result; this trend is discussed further later in the report.

Market report scope

 Scope

• Loss of business due to coronavirus remains SMEs’ biggest concern.
• Key products such as public and employers’ liability saw penetration rates drop considerably from 2019 to 2021 due to the COVID-19 pandemic.

Reasons to Buy

• Learn about the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy
• Identify the effects of COVID-19 on the UK SME insurance space
• Discover GlobalData’s forecasts for the market
• Recognize the challenges faced by UK SMEs
• Identify growth opportunities in the SME space