McKinsey urges insurers to capture SMEs potentials for growth
By Olivia Nnorom
Mckinsey has highlighted priorities that insurers are expected to keep in mind to secure SMEs potentials, as it predicts a thriving market for the small and medium-sized sector, in the coming years.
The global management consulting firm, in a report titled “Small and medium-size commercial insurance: The big opportunity”, emphasised that major insurers and new, capital-rich insurtechs need to recognise the potential in serving small and medium-size enterprises (SMEs),and upgrade their offerings and invest in digital-sales capabilities.
Likewise, commercial customers have learned from the private-customer segment that complex insurance can be made simple and are raising their expectations of speed and service accordingly.
“Over the years, SMEs have proven to be the bedrock of a stable economy. However, the effects of the COVID-19 crises on the sector have lingered since 2020, creating waves and in many cases, ‘closing doors”. This changing SME landscape provides impetus and gives insurers new opportunities to expand their portfolios and tailor them to SMEs,” the report stated.
Based on the consideration that SMEs represent an extremely heterogeneous target group for insurers, Mckinsey noted that insurers should properly employ segmentation to fully accommodate and conquer the small but sophisticated SME needs.
To fully penetrate the sector,the report said insurers are expected to tweak their product depending on the peculiarity of an SME.
“It is also important to note that when companies grow in size and complexity, that initial lower need for insurance products changes. Insurers should incorporate business areas making up the different types of business carrying different types and severities of risk into their decision making strategies, as well as the level of recoveries from the consequences of crises,” McKinsey stated.
Furthermore, Mckinsey advised insurers to develop long term customer loyalty. According to the report, It is not unusual for a company’s risk landscape and business situation to evolve over time, though sometimes this evolution happens abruptly and radically, such as during the COVID-19 crisis. It noted that these progressions warrant changes in insurance coverage and it is important for insurers to detect this need as early as possible.
The report stated that in-depth monitoring of potential triggers for switching not only helps prevent turnover but also delivers valuable information on how to address customers’ newly emerging needs. It also stressed that new business circumstances and premium increases are the most common reason for SMEs to switch insurers.
McKinsey also observed that some pioneering insurers are relying on a raft of success factors covering all possible dimensions of this market from specific strategies to designing outstanding customer experiences. This, it said, is targeted at seizing the opportunities presented by the SME segment.
According to McKinsey, strategic clarity, customer orientation, and operational excellence are essential to successfully tackle the heterogeneity and resulting complexity in the SME segment. It noted that insurers can achieve this by tailoring their strategies in line with some factors including aligning the target segment and objectives to company strategy; thinking like a customer;tailor product portfolios to target customers; building and expanding technical excellence, activating and digitalising sales channels;offering seamless customer journeys;and drive innovation.
Considering that the SME sector has been ignored to an extent, and given the likelihood of a rising dynamic post pandemic market, McKinsey concludes that the opportunities for determined early movers are better than ever.