UK SME Insurance: Market Dynamics and Opportunities 2019
The UK SME insurance market saw growth pick up significantly in 2018, rising from 1.4% in 2017 to 6.3% in 2018. This was due to a slight shift in the makeup of SME business numbers, an uptick in penetration across the majority of product lines, and increased weather-based claims (a consequence of Storm Emma and the Beast from the East) that pushed up premiums. However, SMEs endured a difficult year in 2018 due to a stagnant economy, which has seen consumer and small business confidence plummet. The sector is very closely linked to the economy, and consequently SMEs remain very concerned about Brexit and its potential implications going forward. The performance of this sector is critical for the prospects of the wider insurance market in the UK, as commercial and SME lines provide higher growth opportunities for insurers than personal business.
This report analyzes the UK SME insurance market. Economic factors including GDP growth, SME business confidence, and unemployment rates are explored in relation to the UKs business landscape. Growth in the number of SMEs is explored by business size and industry. The SME market is discussed in relation to the uptake of commercial insurance. Finally, an estimate of the current and historic market size is provided, in addition to a five-year forecast.
- 10 out of the 11 insurance products covered in our SME Insurance Survey saw penetration rates rise in 2019, but overall penetration rates fell according to our 2019 Insurance Consumer Survey.
- Brexit is the biggest concern for UK SMEs, with 45.3% of firms worried about its implications (up from 36.8% in 2017).
- The UK SME insurance market is forecast to be worth 9.3bn by 2023.
- The number of micro businesses declined by 0.6% in 2018, while small-sized enterprises (0.8%) and medium companies (2.9%) both increased.
Reasons to buy
- Be aware of the significance of SMEs within the commercial insurance market and how they are influenced by the UK economy.
- Adapt your strategy and ensure you remain competitive by understanding the opportunities for growth within the SME insurance market.
- Recognize challenges the SME insurance market faces.
- See GlobalDatas forecasts for the SME market.
1. EXECUTIVE SUMMARY
1.1. The SME insurance market saw strong growth in 2018
1.2. Key findings
1.3. Critical success factors
2. THE SHAPE OF THE UK SME SPACE
2.2. The SME market is the backbone of the UK economy
2.2.1. The number of SMEs declined, but they still dominate total business
2.2.2. The number of company liquidations saw its third consecutive rise in 2018, but the growth rate dropped
2.2.3. Construction leads the SME market by business numbers while wholesale dominates turnover
2.3. Macroeconomic conditions affect the SME sector
2.3.1. UK GDP growth was stagnant up to the Q2 2019 decline
2.3.2. UK unemployment continues to fall to record lows
2.3.3. Real pay improved to slight growth in 2018 after declines in 2017
2.4. Key issues affecting SMEs beyond the economy
2.4.1. Business and consumer confidence have been affected by the possibility of a no-deal Brexit
2.4.2. SMEs are still most concerned about Brexit and cybercrime
2.4.3. Business rates continue to rise at the start of each financial year
2.4.4. Rising pension contributions and minimum wages lead to SMEs costs growing
2.4.5. Rising employment costs and economic uncertainty have led to growing use of freelancers
2.5. The government has means to boost the SME sector
2.5.1. Government SME funding dipped in 2018, but a new fund was launched in 2019
2.5.2. The government and banks are aiming to spark investment in SMEs
3. THE UK SME INSURANCE MARKET
3.1. The SME sector is strategically important for insurance
3.2. The SME market registered strong growth in 2018
3.2.1. Rates for most commercial insurance products have grown steadily
3.3. The majority of SMEs hold at least one insurance product
3.3.1. Public liability is the leading SME insurance product
3.3.2. Insurance product penetration varies by industry, in line with the risks involved
3.3.3. Overall insurance penetration has fallen, but individual products saw increases
4. THE FUTURE OF THE UK SME INSURANCE MARKET
4.1. SME insurance is set to exceed 9.0bn by 2022, but growth will remain slow
4.2. SME insurance sector innovation is inspired by personal lines
4.2.1. Digital banks turn to SME insurance as the industry begins to modernize
4.2.2. Next Insurance - a one-stop shop for SMEs - becomes an insurtech unicorn
5.1. Abbreviations and acronyms
5.3.1. GlobalDatas UK SME Insurance Survey
5.3.2. Market sizing
5.3.3. Forecasting methodology
5.4. Secondary sources
5.5. Further reading
List of Tables
Table 1: The number of SMEs in the UK private sector by business size, 2011-18
Table 2: UK private enterprise volume, employment, employees, and turnover by business size, 2018
Table 3: The number of company registrations in the UK (000s), 2014-19
Table 4: UK GDP quarterly growth, 2009-Q2 2019
Table 5: SMEs top concerns, 2019
Table 6: Minimum pension contributions, 2018-19
Table 7: The UK minimum wage by age group, 2010-19
Table 8: Total government SME spend 2014-18
Table 9: Government SME spend by business sector, 2018
Table 10: Insurance penetration among surveyed SMEs by industry, 2019
Table 11: SME insurance penetration rates by size of business, 2016-19
Table 12: Penetration rates by product line and size of business, changes from 2018 to 2019
Table 13: UK SME insurance market forecast, 2018-23f
List of Figures
Figure 1: Micro businesses accounted for 95.6% of enterprises in the UK in 2018
Figure 2: Growth in company liquidations dipped in 2018
Figure 3: Wholesale features prominently in all four SME categories for number of businesses
Figure 4: Wholesale is dominant in terms of turnover for all companies with employees
Figure 5: UK GDP growth turned negative in Q2 2019
Figure 6: The UK unemployment rate has continued to decline
Figure 7: Real wages have shown slight growth in 2019
Figure 8: Small business confidence has suffered since the Brexit vote
Figure 9: There was a sharp collapse in economic sentiment between 2016 and 2019
Figure 10: Brexit once again tops SMEs list of concerns
Figure 11: SMEs five biggest concerns all became more worrying in 2019
Figure 12: Outside of sole traders, SMEs are highly reliant on freelancers
Figure 13: The UK SME insurance market saw strong growth to 8.2bn in 2018
Figure 14: Commercial vehicle premium hikes have been a key factor in overall market growth
Figure 15: Public liability insurance has consistently high penetration across all types of SME
Figure 16: Public liability is still the leading product, despite a second consecutive annual decline
Figure 17: SME insurance is set to see slow but steady growth up to 2023
Figure 18: Forecasting methodology
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