The strength of the SME: the critical role of the community broker in their local and wider economy

17 June 2020

“Shop local” is a catchphrase that has been growing into a rallying cry in recent years, and as the plight of businesses around the country continues during prolonged closure, it has brought the critical role of SME businesses into sharp focus.

Independent businesses that employ fewer than 250 people or have an annual turnover of less than £40 million are viewed as the backbone of the UK economy, and for good reason. 

Making up 99.5% of businesses in all main industry sectors, these businesses collectively employ 16.3 million people and contribute to 60% of jobs in the UK – higher in certain local economies in Wales, Northern Ireland, and South West England, where the figure is 70%. 

And where there is employment, there is the opportunity for growth and prosperity in local areas. 

The treasury was quick to unveil a variety portfolio of financial lifelines for businesses impacted by lockdown measures, a hurdle and perhaps even a final blow for SMEs around the country beyond their control and not accounted for in contingency planning.

Economic recovery, even if it’s slow, depends on these businesses coming out of the crisis largely unscathed.

During a CBI webinar in April, Alex Brazier, Executive Director, Financial Stability, Strategy and Risk, Bank of England noted, “This isn’t the bursting of a bubble or the turning of a book. So companies that were viable going into this to a very large extent should be viable coming out of it.”

It’s the banks, he notes, that are the solution to the problem, rather than the problem as was the case in the financial crash. And the solution needs to be robust because as Dame Carolyn Fairbairn Director General of the CBI said, the results of a prominent regional business folding would have a “blistering impact” on the local economy. 


Trading local: The reciprocal relationships which connect a community

While the proven success of companies forced to work remotely may prompt an evaluation of a more permanent shift in the way we work, local businesses will likely still look to hire in their immediate surrounding area. 

In the case of an insurance broker taking on apprentices, graduates, or those looking for a role change, they are contributing to a nationwide skilled workforce that can support future innovation and expansion, in with this example, insurance. 

Beyond increases in localised consumer spend thanks to employment and training which is the nation’s gain, SME businesses create mutually beneficial connections with other businesses close by, as Bravo Group’s Chief Financial Officer Simon Drew explains,

“People and therefore businesses especially SME businesses have an affinity to someone who totally understands their needs. This comes from a shared intention of serving the client in the best way possible, especially when in the same community or similar geography. When was the last time you walked into a large department store and felt special?”

Insurance is as essential to a business as cash flow for the simple reason that without mandatory employers’ liability insurance in place, which is often formed as part of a commercial combined policy, these businesses will be unable to operate.

On the reverse side, these small to medium enterprises are the lifeblood for most insurance brokers of a similar size, whether they are part of their geographical or sector-specific circle. The insurance broker might then use their clients’ services as well as their custom, if, for example, they need an IT-provider and they happen to have one on their books.


A wider support network for brokers

Just as SMEs lean on a custom-curated grid of other products and services close by, as a broker, being part of a network provides an additional structure of support. Compass provides access to services only available on a national scale, such as connections to prominent insurers which brings preferential rates and exclusive access to products. 

This allows the local broker to offer the same breadth of service while giving their clients access to the experts themselves, rather than call centre staff or a website chatbot. 

Network and membership organisations including Compass and BIBA have a similar helicopter view which allows them to spot shifts or opportunities in the market, without losing the ground-up support element which enables them to best understand their brokers and the challenges they face. 

At times of crisis, both this vantage point and gravitas in the industry offer community brokers assistance in areas which they may not have the time to address themselves. Compass created a series of information packs responding to the latest considerations for the insurance market, while BIBA were able to use their position in the industry to lobby for official clarity throughout the pandemic. 

The organisation has had a critical role in communicating through the COVID-19 crisis on behalf of their members, and Shaune Worrell notes the difference between the broker and insurer within those conversations,

“We have a close relationship with our members that allows us to work with other organisations such as the ABI, and entities including the FCA and the Treasury on their behalf, representing their concerns and addressing the challenges they face. It’s easier for BIBA to have those conversations because of our open structure and network of local volunteer committees which underpin what we do.”


Adapting and communicating through COVID 19

For some, adapting to the new normal has meant the migration from office to home working, and embracing technologies that allow this transition. For others, it has meant overhauling their entire operational model, to allow work to continue or to assist others in times of crisis.

And where businesses have explored their options, their insurance brokers have followed closely behind, ensuring that this change has been accommodated in their policy, or offering assistance in other ways.

There have been examples of change of use, where a hotel, vacant during lockdown, has provided shelter for refugees, and countless instances of general support in the communities from local brokers, making their presence and assistance known by creating links between those in need of advice and those who can provide it – even lending their cars to a recruitment company so candidates can get to work. 

Behind the bombardment of negative press circulating around the industry, client relationships with brokers have remained robust and transparent. 

Insurers have mitigated against a tidal wave of questions from policyholders heading towards their call centres by providing blanket updates on exclusions, extensions, alterations, and allowances. The connections between large insurer, community broker, and the client is what matters most, both now and at renewal. 

During Bravo Group’s recent Insurer Summit event, network members were told, in no uncertain terms, that their role was essential in allowing insurers to work with SME clients.

Sonja Bryson, Managing Director of NIG told audience members,

“The pace of consolidation in this market just goes to show time and time again the value and the strength of those personal relationships independents hold, the professionalism that they bring to the market.”

Nick Watson, Director of Commercial distribution and trading, AXA agreed that the relationships brokers formed with their clients were of great worth,

 “As members you know your local markets, their intricacies and their nuances. And I know this focus brings with it strong and robust client relationships and therefore a high degree of understanding and quality.”

SMEs are credited for their innovation and adaptability. They have to trade hard in order to succeed, and brokers are no different, whether that’s tapping into lesser-explored options for cover or presenting a case to an insurer to put an apparently unattainable product back on the table for the client. Close communication between all parties allows each to do what’s in the best interest of their client wherever possible. 

And it’s within the regions that this close communication can be more easily upheld, something Allianz fully appreciates, as Director of Broker Markets, Nick Hobbs notes,

“We maintain a regional footprint and have sacrificed margin to make sure we stay front and centre relevant and present to you.”


SME and mighty

The size of any business is a major factor in being able to build these close connections. While SME brokers may struggle to compete on tenders for multi-national corporations, they have a route into a market which makes a sizeable portion of the UK economy because of the service they’re able to provide, as Simon Drew explains, 

“The community insurance broker can offer that more bespoke touch – the understanding of the needs of the client, the ability to offer advice, and the risk- managed approach that comes from being close to the community to which the business serves. The own-managed commercial clients that form the bulk of the client base for community brokers want advice that’s akin to their business, and to get the safety of having an expert give them advice on what they don’t know.”

“These clients are often not only insuring their staff, businesses and premises, but also their car, their spouses car, home and other personal insurance requirements – so it goes deeper than just an SME relationship.”

The bigger the business, the harder they have to work to prevent a thinning connection with their customers, one which could break even in the smallest of dilemmas, let alone a pandemic. 

At a time when everyone has been asked to distance, they are finding connections in their local area they may not have known existed. The pull towards local businesses is strengthening as consumers see an alternative to larger entities where the face of the business is obscured, and access to the experts limited. 

Not only this, but the strain all businesses have been put under brings a sense of responsibility to “support local” through the pandemic and beyond if we’re to see the backbone of the economy survive and thrive.  

The insurance community; insurers, brokers, networks, and other supporting organisations will continue to work together in the best interests of the client. The broker provides cover based on an acute understanding of the client’s needs, with products made available thanks to strong insurer connections through a network.

As Nick Watson says, “A network is a collaboration of many components and I have no doubt this network will ensure collaboration will drive the right results over the coming years.”

In the meantime, it’s in everyone’s best interests, not just the business owner, to play a part in supporting businesses in their community. “Shop local” is no longer a plea driven by nostalgia, it’s a must to ensure the UK economy re-emerges with the opportunity for these dynamic and valuable businesses to be at the forefront of the recovery model.  

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