The UK’s SME sector is vast and diverse, comprising 5.5 million businesses - over 99% of the UK’s business population. SMEs account for three-fifths of employment (16.7 million people) and nearly half of private sector turnover (£2.4 trillion).
The UK SME insurance market generated approximately £15.52 billion in gross written premiums (GWP) in 2023, and it’s forecast to reach £17.32 billion by 2027, with a compound annual growth rate (CAGR) of 4.4%. This scale presents a major opportunity for insurance providers, but also significant challenges.
Underinsurance or overinsurance: The double-edged challenge for commercial insurers
SMEs operate across thousands of industries, often with complex and evolving insurance needs. Their agility and ability to diversify make risk assessment difficult, and standard insurance packages frequently fall short. Underinsurance and overinsurance are common, driven by poor understanding of coverage requirements and limited flexibility in product offerings, but advanced risk profiling and sector-specific insights could help insurers overcome these challenges.
Many SME owners make price-led decisions, overestimating their insurance knowledge while underestimating key factors like indemnity periods and rebuild costs. Cyber insurance uptake remains low, with many SMEs unaware of their vulnerability to digital threats. Climate risk, which is also poorly understood and underinsured, is becoming a growing priority with insurers tightening underwriting rules for property insurance due to extreme weather events. Moreover, claims inflation and supply chain issues have led to strong premium growth and increased policy premium costs.
There is a clear need for education around SME insurance propositions. This presents an opportunity for insurers and brokers to build trust by demonstrating sector expertise and tailoring cover to specific business risks by addressing the protection gaps. Time-pressured and price-sensitive SME owners are more likely to engage with providers who understand their industry and offer relevant, well-explained solutions. CRIF can enable insurers to proactively address these gaps through ESG data and analytics, helping improve risk assessment and business resilience at the same time.
Data-Driven Solutions for SME Insurance
Delivering tailored insurance to SMEs is challenging, especially as more businesses turn to online channels. Data plays a vital role in improving customer insight and avoiding purely transactional, price-led purchases. It helps insurers understand SME needs, assets, and risks, enabling personalised cover, ongoing engagement, and long-term relationships. ESG data can enrich the profile of an SME across every stage of the insurance cycle, from underwriting and pricing to the claims management stage.
Why ESG data is the next big opportunity for insurers
While most SMEs recognise the importance of ESG, only a small part have reporting frameworks in place, largely due to cost and complexity barriers. On one side, businesses that fail to meet ESG expectations may face reputational and operational challenges; on the other side, those that succeed could become lower-risk, more resilient policyholders. In addition, younger generations are increasingly prioritising sustainability. They want products and providers that align with their values. This shift creates a striking opportunity for commercial insurers to develop ‘green’ insurance propositions that resonate with these preferences, strengthen brand reputation, and accelerate growth.
Access to rich, accurate ESG insights goes beyond environmental factors, and enables insurers to:
- Design innovative products that support SMEs on their ESG journey.
- Identify vulnerabilities in governance and social impact to better protect businesses.
- Optimise pricing and underwriting considering new types of risks or emerging risks, with a high impact on claims costs
- Stay ahead of regulatory compliance while boosting profitability.
- Onboard ESG-compliant SMEs that often demonstrate stronger governance and risk management, reducing claims volatility.
By integrating ESG data seamlessly into internal processes, insurers can move from reactive compliance to proactive innovation. They can identify new risks more easily, offer timely advice, and deliver added-value services to drive sustainable growth.
