Economic pressures combined with price perceptions of brokers could see Australian businesses skimp on their insurance in a bid to curb expenses, according to a new index.
The 2023 Vero SME insurance index revealed that almost half (47%) of businesses surveyed are making changes to their insurance due to inflation and rising supply costs, which were rated as the biggest worry for business owners, ahead of employee concerns - 1,750 Australian businesses were surveyed, ranging from micro to large businesses. Many may be at risk of underinsurance without adequate broker engagement, the report said.
Roughly two in three (61%) businesses are planning changes in the next year, but less than half (41%) said insurance was not on their priority list.
The index also showed that price perceptions continue to hinder direct buyers from making the switch, with more than one-third (36%) of those surveyed believing it would be more expensive to go through a broker. The figure is up from 25% in 2019.
The index aims to understand the current business climate and business purchasing behavior, and perception of brokers and the insurance industry.
Vero’s head of distribution, Anthony Pagano, stressed that it is critical for brokers to engage with their clients to be seen as a trusted advisor, and not another cost to be managed.
“The report clearly shows that Australian businesses are looking for ways to manage the pressure of the economic conditions,” Pagano said.
“But making uninformed decisions about their insurance, or even making changes to their business without thinking about the insurance implications, may put themselves at risk.
“The research has shown what we already know: that this is a huge opportunity for brokers to demonstrate their value through proactive engagement and offering expertise.”
At the same time, the index showed that broker satisfaction remained high at 78%, which was reflected across all business sizes.
The satisfaction levels may hint that brokers could be stemming the tide of businesses switching to direct purchasing: non-users of brokers decreased from 32% to 25% in the past 12 months; mixed usage rose from 54% to 61%; while heavy broker users held steady.
Direct buyers are also increasingly drawn to using a broker, with 62% of respondents saying they would consider using a broker, a notable increase from 50% in 2022.
Pagano said the findings are encouraging for brokers and were positive reinforcement of their efforts during the pandemic.
“In an uncertain and challenging environment, it’s understandable that clients might be looking for additional support with these important business decisions,” he said in a release.
“As always, it’s important that brokers educate businesses on the complexities of insurance and that in taking a holistic view of their business, a broker can provide greater value overall.”