In a new report, GlobalData notes that while the market registered growth of 3.6 per cent in 2017, it has generally remained flat in recent years, and insurance penetration rates are declining. There is therefore a high level of competition within the market, and insurers will only be able to differentiate themselves successfully if they more effectively engage with smaller micro businesses, particularly those operating as sole traders.
Ben Carey-Evans, Insurance Analyst at GlobalData, described the trend as ‘worrying’: “The majority of new business fall into this [micro] size category. If insurers want to expand their portfolios, they have to target this group successfully with cheap and easy-to-understand policies.”
In 2018, according to GlobalData’s research, insurance penetration rates among sole traders saw a double-digit percentage point decline – considering the fact that 2017 saw the number of micro businesses in the UK rise by 200,000 and the number of sole traders grow by 155,500, this is a considerable niche. However, these sorts of businesses will most likely be less well informed about the types of insurance coverage from which they would benefit, making it incumbent upon insurers to seek out and educate them.
“As many of these sole traders will be entering into new territory, the information they receive is crucial,” said Carey-Evans. “They will receive advice on business bank accounts and tax, for example, but fewer resources are available for insurance. Most sole traders will have transferrable experience in lines such as property and commercial motor from personal lines, so it is the liabilities whose importance that insurers really need to emphasise. They need to explain to sole traders it isn’t just a grudge payment, but something that can save their business a great deal of money.”