2024 Vero SME index shows businesses recognise broker value

Difficult economic times often present a catch 22 for small to medium-sized enterprises (SMEs) purchasing insurance. Although premium costs increase, so too does the desire for insurance and protection for their businesses.

This sentiment is backed by Vero’s SME Insurance Index 2024, which draws upon a survey of insurance decision-makers at 1,500 SMEs and 250 large businesses throughout Australia.

“What we've seen in the last five years, even before the onset of a pandemic, was a marked increase in those who agreed that insurance gives them peace of mind,” says Anthony Pagano, head of distribution at Vero.

“We're seeing that trend of insurance cynics becoming security seekers at the moment,” he adds.

Pagano credits a greater level of awareness and education around insurance amongst SMEs for these trends.

“The sticking point of not making insurance a part of their business DNA is starting to shift in terms of SMEs now wanting to be part of the insurance solution rather than just the insurance problems down the track,” he says.

Insurance affordability

Despite an increasingly positive sentiment towards insurance providers, affordability is an issue in the current economic environment. SMEs are not just examining the cost of insurance but also the extent of their coverage.

Vero’s SME Insurance Index 2024 found that over the past year, 51 per cent of businesses claimed to have made changes to their insurance as a direct result of the economic conditions. The most common change was to increase excess levels, presumably to reduce premiums and therefore take pressure off expenses.

But there is also a trend towards increased coverage. The survey included a new question this year that asked businesses to choose their approach to insurance, from minimal (“I insure as little as possible”) to comprehensive (“I insure every risk I can”).

“This year the index found that we're seeing increased insurance coverage, with only 6 per cent saying that they insure for the bare minimum,” says Pagano. “On the reverse side, 76 per cent insure for every possible risk, because they're realising that they can't afford to self-insure and they cannot afford to self-manage those risks.”

Different concerns around risks are also emerging, with staff wellbeing featuring in the list of top issues SMEs take into account when considering insurance.

A trusted adviser

In such uncertain times, the role of a broker, or a trusted adviser, who can understand the ins and outs of a business and its coverage needs is more important than ever. After all, any broker knows that the insurance needs of a florist are going to be very different to those of a small accounting firm, which are going to be different again from a pet-minding business.

“I think SMEs are seeing their insurance and their risk adviser — being their broker — becoming an extension of their business,” says Pagano.

“Risk management mitigation is about how to prevent the losses from occurring. And one of the most telling factors is client satisfaction data, which says 87 per cent of broker clients have given their broker a score of eight to 10 or more. That's jumped from 78 per cent the year before.”

It’s also a massive increase on the 60 per cent of respondents who gave their broker a score of at least eight out of 10 in 2021.

“Brokers are just getting on with engaging their clients, delivering value-added tasks, looking at their risk profile, looking at the provision of risk foundation measures that they put in place,” says Pagano.

In terms of why they use a broker, 82 per cent of respondents cited good service as a key benefit, while 81 per cent cited expertise and 51 per cent cited ease of the claims process.

Those figures were all up on the 76 per cent, 75 per cent and 34 per cent reported in 2021 for those respective factors.

Adding value

SMEs may be increasingly happy with what a broker can offer them, but that doesn’t mean brokers should rest on their laurels. Critically, they should remember that client relationships are not something they can ‘set and forget’.

“First things first, brokers should always understand and know their client,” says Pagano. “How they highlight what services are best for SMEs — that’s about ongoing client engagement.”

This means maintaining a dialogue with each SME about their business. This should be done regularly, or at the annual contract renewal date at the bare minimum, says Pagano, who suggests brokers ask SMEs questions about any challenges and changes involving factors such as staff, supplies and manufacturing capabilities.

He adds: “It really comes down to three things: good service, demonstrated expertise and deliverance on claims.”

To learn more about Vero’s SME Insurance Index 2024 and to receive 1 CPD point, watch the SME Insurance Index Webinar here. You can also read the full report here.