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UK SME Insurance: Market Dynamics and Opportunities 2018

UK SME Insurance: Market Dynamics and Opportunities 2018

Summary



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 UK 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.

The UK SME insurance market saw modest growth in 2017, as it grew by 1.4% to £7.8bn. But the market environment has been challenging. Brexit uncertainty has slowed GDP growth, which is intrinsically linked to the SME market, with conditions benign as insurers and reinsurers have faced no major incidents forcing significant payouts. There have been several factors counteracting this, which resulted in the very slight growth seen in 2017. The change to the Ogden rate has seen rates harden, particularly in motor-based categories, which have seen strong growth in premium prices since 2016. Yet the number of registered businesses rising in 2017 was largely countered by a rise in liquidations and a fall in penetration rates for insurers. This has been especially prevalent among micro businesses - a segment insurers continue to struggle to engage with.

Scope

  • Micro businesses account for 95.7% of UK private sector enterprises but just 22.0% of turnover.
  • Cyber insurance uptake is on the rise as the issue features heavily among SMEs’ top concerns.
  • 38% of SMEs are concerned about the implications of Brexit.
  • The UK SME insurance market is forecast to be worth £8.3bn by 2022.
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 the challenges the SME insurance market faces.
  • See our forecasts for the SME market.


  • Executive Summary
    • The SME market has stalled due to tough economic conditions
    • Key findings
    • Critical success factors
  • The Shape of the UK SME Space
    • The SME market is the backbone of the UK economy
      • The number of UK SMEs continues to grow, driven by micro enterprises
        • Table The number of SMEs in the UK private sector, by business size, 2010–17
        • Table UK private enterprise volume, employment, employees, and turnover by business size, 2017
        • Table Figure 1: Micro businesses accounted for 95.6% of enterprises in the UK in 2017
      • UK GDP growth remained slow throughout 2017
        • Table Figure 2: UK GDP continues to grow, but at a very slow rate
        • Table UK GDP quarterly growth, 2009–Q2 2018
      • The number of company liquidations rose again in 2017 after falling between 2008 and 2015
        • Table Figure 3: Further growth in company liquidations was seen in 2017
      • Construction leads the SME market by business numbers, while wholesale dominates turnover
        • Table Figure 4: Wholesale and retail features prominently in all four SME categories for number of businesses
        • Table Figure 5: Wholesale and retail is particularly dominant in terms of SME segment by turnover
      • The number of companies registered has risen despite an increase in dissolutions
        • Table Figure 6: New company registrations continue to grow
        • Table The number of company registrations in the UK (000s), 2013–18
      • Business and consumer confidence have been affected by the possibility of a no deal Brexit
        • Table Figure 7: The FSB's Small Business Confidence Index has fluctuated since Brexit
      • UK unemployment continues to fall to record lows
        • Table Figure 8: The UK unemployment rate has continued to decline
      • Business profits are likely to fall if household disposable income is squeezed
        • Table Figure 9: Real wages remain stagnant in the UK despite growth in nominal wages
    • Key issues affecting SMEs
      • Pension contributions, exchange rates, and business rates mean costs have mounted for SMEs
        • Table Figure 10: The pound has weakened in comparison to both the US dollar and the euro
        • Table Employers' minimum pension contribution, 2018–19
        • Table Figure 11: Inflation experienced sharp growth in September 2018
        • Table Figure 12: Business rates are set to rise in April 2019
        • Table The UK minimum wage by age group, 2010–18
      • Rising employment costs and economic uncertainty have led to growing use of freelancers
        • Table Figure 13: Larger SMEs are particularly reliant on freelance workers
      • The government and banks are aiming to spark investment in SMEs
      • The manufacturing sector is most at risk from a no deal Brexit
      • The end of freedom of movement will hit food and drink manufacturers hardest
        • Table Figure 14: Nearly a quarter of food and drink manufacturing employees are migrant workers
      • SMEs are most concerned about Brexit and cybercrime
        • Table Figure 15: Brexit once again tops SMEs' list of concerns
        • Table SMEs' top concerns, 2018
  • The UK SME Insurance Market
    • The SME sector is strategically important for insurance
      • The SME market registered limited growth in 2017
        • Table Figure 16: The UK SME market grew slightly to £7.8bn in 2017
        • Table UK SME GWP and annual growth by size of business, 2015–17
        • Table Figure 17: Micro enterprises account for 61.6% of SME market GWP
      • Motor-based categories have kept rates steady as competition stunts growth
        • Table Figure 18: Commercial vehicle premium hikes have been a key factor in overall market growth
      • Public liability remains the leading SME insurance product
        • Table Figure 19: Public liability insurance has consistently high penetration across all types of SME
      • Insurance product penetration varies by SME industry, in line with the risks involved
        • Table Insurance penetration among surveyed SMEs, by industry, 2018
      • Declining penetration rates are a growing issue insurers need to address
        • Table SME insurance penetration rates by size of business, 2015–18
        • Table Penetration rates by product line and size of business, changes from 2017 to 2018
        • Table Figure 20: Public liability is still the leading product, with both key man and cyber recording notable growth
  • The Future of the UK SME Insurance Market
    • SME insurance is set to exceed £8.0bn by 2020, but growth will remain slow
      • Table Figure 21: SME insurance is set to see slow but steady growth up to 2022
      • Table UK SME insurance market forecast, 2018e–22f
      • Cybercrime remains a key worry, and insurers need to respond
      • The changing face of SMEs needs to be catered for
      • The insurance industry is looking to real-time insight to help SMEs
  • Appendix
    • Abbreviations and acronyms
    • Methodology
      • GlobalData's 2018 UK SME Insurance Survey
      • Market sizing
    • Bibliography
    • About GlobalData
      • Table Figure 22: About GlobalData

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