As unemployment and the need for social distancing measures have surged around the world due to the Covid-19 pandemic, insurers are forced to acknowledge two incontestable trends: the lower price elasticity of their customers and their desire to purchase insurance digitally. This is true for both personal and SME commercial lines. 

Price comparison websites ("PCWs") disrupted personal lines long ago in the UK, particularly motor, and are steadily gaining share in the US. But can the trend be extrapolated to SME commercial lines? We would answer with a qualified 'Yes.' 

For aggregators to win in SME commercial, what do you have to believe? Look first at the UK motor market. The carriers, generally in tier 2, gladly joined PCWs at the start, having everything to gain and nothing to lose. Tier 1 carriers resisted as long as they could but were ultimately persuaded to participate as they watched their market share decline. It had become clear that distribution via brokers was too costly in a market where consumers were sensitive to price. And eventually products became simpler to navigate while simultaneously being bundled. The SME market is awakening to a similar battlefield to maintain their customer base and insurtech startups are using the same tactics. 

While some D2C commercial lines startups like Next are seeing strong product market fit, that is at the very small end of the SME market. Most SMEs want the reassurance of speaking to a broker to reaffirm they have the insurance protection they must have or ought to have. 

But we see SMEs increasingly starting the purchase journey online, educating themselves and then reaching out to brokers for reaffirmation of their choices and purchase. An implication of the digital model is that SME brokerages need to be set up for primarily inbound calls and fewer outbound sales. 

We see enormous potential in the market to digitise many aspects of SME insurance, including distribution. At the same time we believe the broker will retain a vital role.