The past year has not been easy for small and medium-sized enterprises (SMEs), with a host of financial difficulties putting pressure on even the most resilient firms and traders. A report by Allianz has shone a light on the biggest challenges faced by SMES in 2023. How are these obstacles affecting the way SMEs approach insurance?

Energy and supply chains

No two SMEs are the same, but the challenges they have been facing in 2023 have many of the same causes. Following the uncertainty of Covid-19 and Russia’s invasion of Ukraine, UK businesses have had to contend with rampant inflation and turbulent financial markets. On top of that, logistical problems have added to the stress and strains.

In the report, SME decision-makers stated that their most significant day-to-day problems included:

• Energy bills (53%)
• Supply chain problems (35%)
• Late payments or unpaid invoices (30%)
• Competition (27%)

The report also drew attention to some of the ways companies are dealing with these problems. Solutions to high energy bills include energy saving measures like changing the way their business operates (46%) or installing solar panels or other technology (23%).

The insurance impact

Despite the turbulence of the past year, a clear majority of SMEs (60%) have kept their insurance cover unchanged in the past 12 months. Moreover, a greater number have increased their cover (21%) than reduced it (19%).

Looking ahead to the rest of 2023, respondents acknowledged inflation and the cost-of-living crisis (64%) as a key concern, with more than seven in 10 stating that the crisis is having a negative effect on their business. Other threats include the state of the UK economy in general (33%) and the impact of Brexit (25%).

SMEs play a vital role in the UK’s economy, accounting for more than 99% of the business population. SMEs dominate insurance too, with insurance premiums written for SMEs representing more than 60% of the gross premiums written for commercial property and casualty lines.

Dialogue still key

In times of uncertainty, the insurance needs of SMEs can change quickly – and insurers need to be ready to meet these demands.

Commenting on the report, Helen Bryant of Allianz said, “SMEs are having to be increasingly agile and adapt their business models or modify their operations. These agile entrepreneurs need to let their insurance provider know when they’ve made significant changes as this could lead to gaps in cover.

“In this regard, brokers play a crucial role: their expertise will help businesses have the right protection for their changing needs. In this way, the insurance industry can really support business diversification.”

At Focus, we’re always here to help our brokers with the challenges that they and their clients are facing. To chat with us about our range of bespoke construction products, please call us on 0345 345 0777 or email sales@focus-insurance.com.