In a significant coup for SBAA’s biannual International Small Business Summit in June, BizCover, Australia’s No. 1 online small business insurance service provider, will be a major sponsor of the event at Sea World Resort and Conference Centre from Thursday, 10 June.
Moreover, this leading insurance platform that supports around 130,000 SMEs annually with their business insurance needs has linked with the Summit at a time when access to insurance, simplicity, transparency, and trust are all prominent business insurance issues.
According to Jane Mason, Product and Channel Manager from BizCover, the traditional process of obtaining insurance for an SME is inherently inefficient as the insurance industry is still primarily intermediated and manually transacted by brokers and insurers. Moreover, for SMEs requiring quotes, particularly when seeking cover for multiple products, this process is also manual.
Mason says, “It is a complicated and lengthy process with little transparency or consistency. This leads to a lack of trust by the consumer.
“That said, in our experience, most SMEs don’t require complicated, expensive personal advice and prefer generic and not bespoke products and, it is possible to provide such generic insurance products cost-effectively.”
Gaps and risks to business continuity
Mason maintains a lack of transparency and simplicity creates a shortage of trust in the industry, which can lead to underinsurance.
“If small businesses do not trust or understand the service or products provided, they may opt-out of essential types of cover or only take the bare minimum of protection.”
Pricing and lack of pricing stability also contribute to underinsurance, as businesses cannot afford to pay the premiums, or the premiums reinforce a decision not to purchase.
“Often, insured businesses are choosing to purchase lower limits, reducing their cover or carrying only ‘necessity purchases’ required by contract.
“Each of these decisions can leave businesses at risk in the event of a claim. Cash flow is a serious problem for SMEs, and an uninsured claim can put people out of business.”
Addressing the risks of underinsurance
As is the case with many homeowners, many business owners in Australia are significantly underinsured. Mason reveals there’s ample evidence of underinsurance in the industry with market statistics suggesting that up to 70% – 80% of businesses are underinsured.
Mason believes the BizCover offering has addressed some of the challenges contributing to this underinsurance however there is still more work to be done. For example, BizCover offers Business & Office Pack Insurance options from a number of insurers, covering an SME’s business premises and contents against loss, damage, or theft. The package cover may protect against financial loss experienced from an insured interruption to their business, which is business interruption insurance. Currently, only 3% of SMEs buying Business & Office Pack insurance purchase business interruption insurance. Moreover, of the SMEs purchasing Professional Indemnity insurance, more than half (52%) are not purchasing Business & Office Pack insurance, potentially leaving them exposed.
In terms of no insurance, the Insurance Council of Australia has previously released figures indicating that 12.8% of SMEs have no insurance.
“So, sadly, underinsurance is a common problem amongst SMEs and, an uninsured or underinsured) claim can have serious consequences for a small business operator,” confirms Mason.
Areas of concern requiring better industry response
A significant area of concern for the insurance industry is the issues caused by business interruption underinsurance. Mason says the underinsurance of business interruptions has become a hot topic in the wake of COVID-19, and it presents serious challenges and consequences for insured SMEs and the insurance industry.
“Business Interruption has always been a big issue, particularly in areas prone to certain perils. However, COVID 19 is an extremely specific issue related to a unique set of circumstances and one that the courts are still deciding on.”
Technology gaps also need addressing with better adoption and availability, Mason suggests. “Technology is, in my view, the key to addressing issues of access and simplicity by helping SMEs make insurance less of a grudge purchase by streamlining the process and the experience.
For example, an SME can obtain multiple quotes from multiple insurers in minutes on the BizCover platform and instantly receive policy documents.
“There is consistency in pricing and instant coverage comparisons. It is only through adopting technology that we have been able to remove the inefficiencies, which in turn contributes to better pricing and pricing stability,” says Mason.
By way of example, the most recent BizCover Insurance Price Index showed that commercial insurance premiums have increased by 20% over the last 13 quarters. However, pricing of the BizCover SME offerings has remained relatively flat since Q2 FY17, with a slight increase this quarter (Q3 FY21) of 3.1%.
Automation also builds trust as SMEs have a good experience, and quality control can be built into the process.
“The insurance industry has a very low NPS (Net Promoter Score) sitting at less than +20. In comparison, BizCover has embedded sophisticated and automated QA systems, and we have an NPS exceeding +70,” says Mason.
“If the quoting and sales process is easy, user friendly, transparent and these efficiencies are reflected in pricing and user experience, it empowers SMEs to make the decisions to purchase and to be able to afford the insurance that they need.
“This can help close the underinsurance gaps present in the Australian market and serve to better protect the country’s small business sector,”
To find out more about how BizCover can assist you get the right business insurance cover for your SME call 1300 920 643 or visit https://www.bizcover.com.au/
To find out more about becoming a member of SBAA, call us today on 1300 413 915.