Proposed pricing regulations could add a new layer of complexity. SMEs have also become increasingly price sensitive, with “lowest price” rising seven percentage points since May, to 49 percent. According to our recent survey, the top factor in selecting an insurance provider is getting “good value” from insurance products, at 57 percent (Exhibit 1).
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The pandemic has reinforced a “back to basics” mindset, with fundamentals in insurance (coverage, service, and value) taking on added prominence for SMEs. More than 45 percent of sole traders and micro SMEs believe that they will be able to endure another year of the pandemic, compared with around 35 percent in their larger SME counterparts. Construction, information and communication, and retail and wholesale SMEs are less optimistic-less than one-third believe they will survive if the pandemic continues for more than a year. SMEs in the administrative and support, business consulting, and property services industries are most resilient more than half believe they will still be in business even if the pandemic continues for more than a year. By contrast, only one-quarter of businesses in the retail and wholesale industry and finance and insurance industry reported a significant decline in sales.Īs SMEs look to the future, their outlook is shaped by their industry as well as the size of the organization. Among our sample, SMEs in the accommodation and food services sector were the most impacted, with more than half reporting that their sales were greatly reduced. While no industry escaped the impact of COVID-19, some were affected more heavily than others. Our research compared four different categories of enterprises: sole traders, micro (two to ten full-time equivalents), small (11 to 50 FTEs), and medium (51 to 250 FTEs). We then followed up with another survey of 504 SMEs in August 2020 to gauge how their outlook and priorities had changed. The first two, in the field in April and May, established a baseline in the midst of the initial wave and business response.
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To understand how UK small and medium-size enterprises were responding to the pandemic and economic downturn, we conducted a series of surveys. The impact of the pandemic was more pronounced for sole traders and micro SMEs, which saw their revenues fall by 34 and 33 percent, respectively, compared with 23 percent for medium SMEs. Since March of this year, 71 percent of SMEs have experienced declining revenues, with 30 percent reporting that their sales were greatly reduced. The pandemic has affected different segments in different ways McKinsey conducted three SME surveys during the pandemic, and our analysis identified a number of trends that are shaping the segment (see sidebar, “About the research”).
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Since the onset of the pandemic, UK SMEs have had to scramble to weather the resulting downturn. This dynamic provides insurers with an opportunity to capture more of the SME market by focusing on thriving segments, developing new products, and rethinking customer journeys. SMEs also learned they were not covered for certain things during the pandemic and have begun questioning the relevance of some products-in particular, business interruption policies.
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COVID-19 has accelerated a number of existing trends for SMEs, from the products they are prioritizing to how they prefer to engage with insurance carriers.