Canada’s small and medium-sized businesses (SMBs) make up a vital part of the national economy, employing two-thirds of the workforce and contributing nearly half of the GDP. Yet in the insurance world, they’re often underserved, and the insurance solutions presented to them are often oversimplified.
According to Jonathan Weir (pictured), partner at KPMG with a focus on the insurance sector, one of the biggest mistakes brokers and insurers make is treating SMBs the same way they treat personal lines clients.
“There’s a lot more complexity to that,” he said.
Weir acknowledges that for a small subset of the market – typically at the lowest end of the SMB spectrum – streamlined, template-based insurance solutions can work. Independent professionals like accountants or lawyers, for example, often have predictable, narrow risk profiles.
“If you go at the small end of SMB … you can say the complexity of that business is relatively small, and the consistency versus others of the same type is quite high,” he said.
This consistency allows insurers to create pre-configured packages that typically include basic general liability coverage, with little or no need for property or auto insurance. However, more specialized protections – such as errors and omissions (E&O) and potentially cyber coverage – still need to be factored in, depending on how the business operates.
In those cases, it makes sense to apply a more standardized, technology-driven underwriting approach.
“In the same way personal auto insurance is offered in an efficient way, you can leverage technology to help run through that,” Weir said.
The challenge, says Weir, is that only a small portion of SMBs are this straightforward. Once you get into broader or blended operations, that streamlined approach starts to fall apart.
Many businesses in Canada operate across multiple functions, making it difficult to classify them under a single category. Rather than fitting into one industry box, these composite businesses often span several areas and require a more nuanced understanding of their operations.
“There’s dozens and dozens of different segments,” he said.
Weir gives the example of a client who might operate a lawn care company in the summer, shift to snow clearing in the winter, and supplement their revenue with short-haul trucking. “You can’t put that in a single box and run that through a simple algorithm.”
He says that in these situations, relying on simplified coverage models can result in significant gaps, as accurately placing and understanding the full spectrum of risks requires human expertise.
Attempts to automate risk classification through rigid coding or algorithms often fall short, which can lead to misclassification, incomplete coverage, or both.
This is further complicated by the diversity of industries within Canada’s SMB landscape. For every business that fits a standard profile, there are dozens more that operate with unique combinations of services, locations, and operational risks.
As Weir notes, this wide segmentation makes it hard to build scalable solutions that don’t oversimplify or misclassify exposures.
Beyond complexity of risk, Weir highlights another key distinction: buying behavior. SMB owners approach insurance very differently than personal lines consumers.
Personal insurance customers tend to have long-term familiarity with their products – like auto insurance – which haven’t changed much over time, and they often trust established brands, especially those connected to other financial services they already use.
For business owners, he says, it’s a different story.
“There’s not the same amount of confidence that, ‘Oh yeah, I just need to get that product off the shelf… and I’m confident immediately that this is going to provide the cover I need.’”
Weir says that this lack of confidence among business owners makes the broker’s role even more critical – not just as a policy facilitator, but as an advisor.
Many clients want reassurance that they’re making the right choices and often seek confirmation from someone with technical expertise before finalizing their decisions.
The solution for this market segment is, as Weir puts it “somewhere in between.”
“There is a case where you can say, great, there’s a subset of the market we can handle this way,” he says. “But I think there’s a big chunk of the market that’s difficult to solve for that.”
