New Simply Business head eyes fresh markets and predicts aggregator disruption

In the 12 years David Summers has worked for Simply Business, he has witnessed first hand the transition of a market towards digital.

Now taking the helm of the broker, Summers predicts there are big changes on the horizon, from disruption to the current aggregator market to increased online business insurance demand from more complex SMEs.

While in the background traditional face-to-face brokers are less impressed by the shift towards online purchasing, Summers says the trend is not going away, and that it promises further growth for the company.

“Next year we are looking at 40% growth - the digital market is huge,” he said.

The broker currently serves 500,000 customers, 70% of which are UK micro-SMEs.

And as the broker looks to take on more complex SME customers next year, Summers sent a warning out to traditional commercial brokers that customer demand for innovative distribution methods would only grow.

“I think the reaction from some brokers is probably a bit late in the day,” he said. “They’ve done a great job and we’ve benefitted from the industry they have built up, but there will be a new form of what digitally savvy customers are demanding.”

Strategy

As it looks to meet the growing needs of its current customers and those new more complex customers Summers says the company is increasingly being contacted by, the firm is employing an “adjacencies strategy” for the second half of 2019.

Summers explained this meant the company would decide from list of options which new segment of the market to venture into, based on how it could realign its current digital capabilities to be successful.

“Into next year we do want to diversify and we want to be useful,” he said.

The list includes a potential forays into the cyber market, commercial van or even the personal lines space. But Summers said the process would be a “discovery exercise” and that the firm would only develop an offering for customers if they knew it would be successful.

He said: “Our strategy is basically to work at understanding slightly different customer segments and slightly different products where we could do a good job. Based on this, we’ll make a decision on which markets to go into and which we won’t.”

He confirmed this meant that by the start of 2020, Simply Business would have entered at least one new market segment.

Contact

Simply Business built its customer base around micro-SMEs, which Summers said traditional brokers were unwilling to touch in the early years of the company, due to their low value. Simply Business customers are typically in their early years of trading, with little knowledge of their insurance requirements.

Unlike traditional brokers, Simply Business does not talk through a customer’s insurance needs face-to-face on the premises, but does have a contact centre.

Alongside an online form driven by machine learning to help the client identify their needs, Summers said the contact centre had become a crucial part in its offering - to the surprise of what directors thought would happen to the centre.

He said: “Whereas we thought five years ago that that contact centre demand would decrease over time and customers would become more digitally savvy, that is not the case. 

“Actually, having an amazing conversation over the phone combined with a good digital product so that people want to buy it, is a really advantageous position.”

The realisation has lead to increased investment in expanding the centre, and improving the quality of conversations through training.

Underinsurance

But still, only around 50% of Simply Business customers utilise the contact centre when purchasing their insurance.

Traditional brokers who advocate the benefits of face-to-face insurance advice, have spoken of the dangers that arise through purchasing commercial insurance wholly online.

When there is no one to talk through what specialist needs the business may have, brokers have said it leaves businesses prone to being underinsured, and lacking some crucial cover in a particular area of the business.

Summers conceded that underinsurance is a risk, but said the firm does “everything it possibly can to understand a customer’s business needs” and that responsibility ultimately fell on the customer.

He said: “We think we’ve built a proposition that does a pretty good job at understanding the customer’s needs, but of course if they’re buying online it’s their decision.

“The customer has accountability for what they purchase and our job is to make sure that by delivering their needs, we offer the best proposition to help them understand that decision.”

But Summers added that he does not believe underinsurance is a significant issue for customers. Around 60% of the firm’s SME customers do not buy the option with the cheapest price - Summers said this demonstrated that customers were not using the site to solely find the cheapest option, and were purchasing cover that reflected their unique business needs.

He said the underinsurance risk was far greater among aggregators, where he believes the choice around cover has been reduced entirely to choice.

Aggregators

And he was keen to clarify that Simply Business is very different to an aggregator.

Simply Business in 2011 partnered with ComparetheMarket to be the exclusive provider of business insurance for the price comparison website, and the signed a further ‘long-term’ deal in September this year.

The broker also has agreements with GoCompare and parts of MoneySupermarket. 

Research in April from GlobalData showed aggregators had a 14.7% share of the commercial SME market in 2017, compared to 5% in 2016.

But looking into the future, Summers said he expects the market to move on from the aggregator model within the next few years.

“I think there are challenges in the proposition today,” he said. “I suspect there will be some evolution on insurtech propositions that address the fundamentals of the product, as well as the distribution. 

“And when you look at a market in intuitive terms, and there are four or five people doing the same thing, you’ve got to believe that 12 years in there needs to be differentiation that is not just brand.”

Models

But Summers agrees that aggregators have been hugely appealing to consumers, and have therefore been of huge value to Simply Business.

He added: “We respect their business model and while they’re here and while we can build a partnership that benefits them and benefits us we’ll take part in that.”

To those brokers critical of the online distribution of insurance products, Summers said they had to appreciate that they are dealing with a different market.

And in batting away accusations customers have less choice or understanding about what they are purchasing, Summers reiterated that it was their market of tech-savvy SMEs which was growing.

“I respect the offline broker model and think it can be good for different types of customers, but it’s definitely not going to suit the needs of all customers,” he said.

“We have a different market to the traditional broker and I think to suggest that you don’t listen to the consumer needs on how they want to buy a product is a touch naïve.

“Most of us buy things online today and we do that for good reason. We do that because it gives us a chance to read and understand and expose our curiosity on our terms. It’s down to them to make a decision as a consumer, and that is fair.”