Most SMEs would prefer the stability of a fixed rate premium option, according to new research into business attitudes to insurance pricing by Norwich Union.
Most SMEs would prefer the stability of a fixed rate premium option, according to new research into business attitudes to insurance pricing by Norwich Union.
69% would opt for a tied-in, fixed rate premium, remaining the same (barring claims and major changes to the business) throughout the negotiated period.
Only 11% were interested in the rollercoaster option, paying steep increases some years, in return for reductions in others. And nearly two thirds (62%) of SMEs would rather their insurance premiums increased by a modest amount year on year.
While most SMEs (84%) claim to understand the reason why their premiums change year on year, nearly half (46%) believe insurers increase premiums to keep up with inflation, while a third believe premiums rise simply so insurers can make more profit. Less than one in ten were under the impression that brokers were to blame, taking more of a cut.
More than a third of SMEs think that up to 40% of the total cost of a premium goes straight to the insurer’s bottom line, while 15% believe that as much as 60% would be profit. And nearly 5% thought more than 80% of a premium goes straight to profit.
John Seaton, Underwriting and Pricing Director, Norwich Union, commented: "Customers may appreciate increasing levels of cost for insurers, but they clearly have little understanding of the relation between the price of cover and its real cost. We are at a pivotal moment in the commercial underwriting cycle where we can potentially break the age-old pattern of volatile highs and lows in premiums. We need to educate customers on the long-term nature of insurance pricing and the benefits of a gentler ride."
Opinions are divided on the motives behind industry initiatives to control premium instability. While 40% believe that initiatives such as anti-compensation culture campaigns and rehabilitation are good for the welfare of claimants and society as a whole, a further 37% cynics believe they are just another way for insurers to make money.
When quizzed on who they trust to give fair insurance advice, most SMEs claimed they turn first to their independent financial advisor (29%). It’s good news for brokers though, with as many SMEs trusting their broker to give an impartial view, as their friends and family (27%). Over half (53%) of SMEs would pay a slightly higher premium to their broker to get good advice. Just over a quarter (26%) turn to the media for trusted advice from financial journalists, while 22% now seek financial advice on-line.
Only 7% trust an insurer to tell it like it is, the only compensation being that banks and building societies score an even less trusted 5%.
Perhaps surprisingly, however, insurers do not appear to suffer from the same ‘fat cat’ criticism as other industries. 40% of respondents thought that banks suffered most from fat cat bosses, followed by utilities (24%) and pharmaceutical heads at 13%. Insurance executives trailed in fifth position, with only 7% of SMEs attaching the fat cat vilification to them.
When it comes to choosing their main insurance supplier, price, unsurprisingly, remains top of the list of priorities. While 32% of SMEs cite competitive pricing as the main reason, only 25% always buy the cheapest commercial insurance they can find. Other factors such as service, reputation, good policies and being easy to work with also come into play.
-ends-
For further information, please contact:
Debbie Wells at Staniforth on 0161 274 0100 or David Ross at Norwich Union on 08703 66 68 65/07786 526350.
Notes to editors
The research was conducted for Norwich Union by independent research company Lightspeed Research amongst 500 SMEs across the UK.
- Norwich Union is the UK's largest insurer with a market share of around 14 per cent
- With a focus on insurance for individuals and small businesses, Norwich Union insures:
-
- one in five households
- one in seven motor vehicles
- more than 800,000 businesses
- Norwich Union products are available through a variety of distribution channels including brokers, corporate partners such as banks and building societies and Norwich Union Direct.
- Norwich Union’s news releases and a selection of images are available on the Aviva internet press centre at www.aviva.com/media.
- An ISDN facility is available for studio quality broadcast. Call the press office on 08703 66 68 68
- For all life & pensions media enquiries 08703 66 68 73
- For all other media enquiries 08703 66 68 68
- Members of the General Insurance Standards Council
- Members of the Aviva group