SME battle to become more intense

Andrew Tjaardstra, Editor

Just when you felt there could not be any further competition, more insurers, underwriting agencies and brokers are determined to drive into the small to medium-sized enterprise market.

As Brendan McManus cites opportunities for Willis to grow in the SME market - with Willis aiming to be the "leading broker in the segment" according to Tom Bartlett, chief executive of Willis global small commercial business - similarly his former boss Bridget McIntyre has said that Royal and SunAlliance will be unveiling a new proposition for this market in July.

Meanwhile, AIG is already pushing for SME business with its underwriting agency Adding 1 being led by Julie Rodilosso, and iprism is offering an online comparative quote facility to produce quotes from 10 insurers within two minutes. This last offering, in particular, raises further concern about the commoditisation of commercial lines.

The rush to the SME market should not be surprising. Accountancy firm KPMG has reported that a survey of businesses with an annual turnover of between £5m and £500m revenue found that 76% were positive about their businesses over the next year. And as Graham White of Zurich, who produced a renewed SME offering last year, has said: "an SME business is a more homogenous product where there are lower risks and more customers."

This business confidence has reached its highest level since 2004, and is in spite of a spate of worries such as rising energy prices, rising taxes and higher interest rates. In the short term, the competition for providing these firms with their insurance can only be good news for customers, however, it raises questions about the sustainability of the soft market.

As more insurance players come into this market, then rates can only become more competitive. This will increase the drive for volume as nobody will want to miss out when the market turns. However, when this happens, SMEs will ask questions and brokers will need to make sure their client relationships are in good order, especially if insurers are offering discounts for market share.

There are undoubtedly opportunities in this market, which has around four million businesses, although whether the new entrants can dislodge the more experienced competition still remains to be seen.