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Changes in SME distribution are primarily being driven by shifting preferences in purchasing method as opposed to channel. The preference towards online purchasing initially provided the direct channel with an opportunity to grow. However, as brokers have begun to move into the online space for SMEs, their market position has strengthened at the expense of direct insurers. The direct channel has therefore slightly lost share in the distribution of insurance for SMEs in 2016.
Micro-enterprises have the greatest affinity for purchasing direct from an insurer. They have the smallest risks, which makes them more suited to purchasing a commoditized product online. SMEs that purchase direct from an insurer view both the level of cover and the price of premium to be of equally high importance, highlighting that they are looking for a product that offers value for money. Customers are loyal to the direct channel, with over three quarters of SMEs that purchased their last policy directly not considering switching their route to market. Although channel loyalty is high among SMEs overall, of those that are considering changing their route to market, most intend to switch to a direct insurer. AXA is the dominant insurance provider for SMEs purchasing direct. Direct Line, Hiscox, Zurich, and NFU Mutual are also popular choices.
20.2% of SMEs purchased direct from an insurer in 2016.
AXA is the leading direct SME insurance provider, with 23.5% of the SMEs that purchased direct choosing the provider in 2016.
Customers are loyal to the direct channel, with 77.8% of SMEs that purchased direct not considering switching to a different type of provider.
After falling to a four-year low of GBP6.64m in 2014, expenditure on business advertising increased by 9.9% to GBP7.30m in 2015.
Verdict Financial's "UK SME Insurance: The Direct Channel 2016" report discusses the significance of the direct channel within the SME market. It examines the values of customers purchasing direct from their insurer, analyzes customer loyalty and switching, and highlights the most popular direct insurers among customers using our 2016 UK SME Insurance Survey.
Reasons To Buy
Adapt your distribution strategy to ensure it is efficient and still meets customer purchasing behavior.
Understand what customers want from a direct insurer in order to enter or remain competitive with the channel.
Benchmark yourself against others operating within the direct channel.
The direct channel has lost share as brokers move into the online space
Critical success factors
THE GROWTH OF DIRECT-TO-SME INSURANCE PROPOSITIONS
Brokers are gaining share of product distribution at the expense of direct insurers
The direct channel is most popular among micro-enterprises
The direct channel is competitive against brokers for home-based SMEs
PROVIDERS AND PRODUCTS IN THE DIRECT CHANNEL
The direct channel is expected to see growth within the SME market
To attract customers direct insurers must offer products that offer good value for money
Most SMEs purchasing direct are not looking to change their route to market
Most SMEs considering switching will move to the direct channel at renewal
AXA remains the leading direct insurer for SMEs
AXA dominates the SME market for customers purchasing direct
AXA, Direct Line, and Hiscox are the top providers across most products for direct SMEs
Aviva has brought back its direct online offering for micro-SME business insurance
Direct insurers must advertise to raise brand awareness and attract customers
Business insurance advertising increased in 2015, and is expected to rise again in 2016
Direct Line and Hiscox are the only insurers that notably advertise their offerings
About Verdict Financial
Figure 1: Direct insurers are losing share of SME product distribution to brokers
Figure 2: Micro-enterprises have the greatest affinity for the direct channel
Figure 3: The direct channel is more popular among home-based SMEs
Figure 4: The most important reasons for choosing a direct insurer are price and cover provided
Figure 5: SMEs are loyal to the direct channel
Figure 6: SME switching intentions are low, but the direct channel is expected to see growth
Figure 7: AXA is the top performer in the direct insurance segment
Figure 8: Summary of the top five insurers for SMEs purchasing direct, by product
Figure 9: Business insurance marketing increased annually by 9.9% to GBP7.3m in 2015
Table 1: Majority channel used for purchase: broker and insurer (direct), by business size, (%)
Table 2: Top performing direct insurers in liability, commercial property, and commercial motor, 2016
Table 3: Top performing insurers in specialist commercial product lines, 2016
Table 4: Total business insurance advertising expenditure (GBP), 2011-H1 2016
Table 5: Business insurance advertising by the five highest spending brands (GBP), H1 2016
AXA, Direct Line, Hiscox, Zurich, NFU Mutual, Simply Business, YOUR Insurance, Moneysupermarket.com, Confused.com, Comparethemarket.com, Gocompare.com, BUPA, Allianz, Admiral, CS Healthcare, AIG, Aviva, Trade Direct, RAC Insurance, Ecclesiastical
Direct, SME, micro-enterprise, micro enterprise, channel, distribution, online