Is coronavirus the catalyst insurers need to shake up how they treat SMBs?

Startups’ responses to covid-19 show incumbents how it’s done

Sabine VanderLinden

Small and medium sized businesses (SMBs) could be some of the biggest losers of the covid-19 outbreak, with one survey for the US National Federation of Independent Businesses showing that 76% of small businesses rate the impact of the virus as profound.

This should worry us all, because SMBs will be crucial to mitigating the negative effects of coronavirus on the global economy. They account for over 95% of all firms and 60%-70% of total employment in OECD countries. Sadly, the virus has exposed how few small businesses have appropriate insurance, and how ill-equipped many incumbents are to respond to the needs of this crucial market.

Happily, several InsurTech startups have emerged and many of these are already showing incumbents how to better support SMBs both during lockdown and in the months to come.


SMBs are not properly insured

According to the business data platform Statista, there were 25.1 million SMBs in the European Union in 2018, over 23 million (92%) of which were micro-businesses and freelancers. Collectively, they contributed €4.4 trillion to the EU economy and employed 97.7 million people.

Yet, as this Fintech Times article makes clear, “there are grave concerns regarding the ability of… micro and small businesses to survive during a pandemic-led recession”. Specifically, the article suggests not enough freelancers have professional indemnity insurance, to cover them in case they fall ill and are unable to meet a deadline for a client.

At the same time, the UK’s Financial Conduct Authority (FCA) has said that 40% of SMBs could be underinsured. It is likely to be between 40% to 60% across Europe actually.


Incumbents failing to support SMBs?

No one could argue that incumbents are not supporting customers and communities through the current crisis. Thanks to Nigel Walsh, partner at Deloitte and long-time friend of mine, we can view a handy list of coronavirus support measures from tier one European and North American insurers here. As you’ll see, as well as funding support programs for communities and frontline healthcare workers, the measures include deferring premium payments, rebates, and discounts.

But the statistics I’ve quoted above show the fundamental problem facing incumbents seeking to support small businesses. SMBs were already vulnerable to shocks like the one we’re going through right now even before the virus struck. Worse, SMBs feel underserved – even taken for granted – by incumbents. We can see this in studies such as this one from the US, or this one from the UK.

Perhaps this is why guidance from the UK’s FCA points out how crucial it is that business interruption claims for SMBs be “assessed and settled quickly”.

Incumbents are not doing anything wrong in how they’re seeking to support small firms during this crisis. Far from it. But the two studies and the FCA guidance linked above show instead that the coronavirus is exposing the deeper problem of insurers under-serving SMBs. The lack of innovative solutions for this underserved segment. While rebates and price freezes are useful, they are not solving the problem for SMBs.

This is where InsurTech and HealthTech startups can offer examples of where technological innovation offers more imaginative and more sustainable long-term solutions to help SMBs both during quarantine and through the difficult months ahead. Us in the InsurTech world spend a lot of time screening the very best of candidates, gathering key data points to identify the likelihood of growth and failure – near term, medium term and longer term.


Covid 19 has brought out the best in many startups

There are some great examples of startups going beyond the call of duty in their response to coronavirus.


Let’s begin with startups in the health space:

Equipsme offers SMBs free access to healthcare plans

Pure digital player Equipsme offers advice and well-priced healthcare plans to SMBs that need coverage for their employees. Launched in 2018, the company announced in March it would offer its company healthcare plans to UK-based SMBs with 20 employees or less through August 1st, after the predicted peak of the virus.


Medyear builds free online symptom checker

US Hartford InsurTech Hub alumnus Medyear offers patients an all-in-one personal health record, where they can store, access and share their medical history, lab reports, medications, procedures, and vaccination records. Their response to the virus has been to build an online covid 19 symptom checker which anyone can access at any time, for free. If symptoms are identified, key parts of the health value chain that Medyear digitally connects get triggered.


In the cognitive intelligence and operational space:

Threatbook helps protect remote workers from online threats

Chinese company Threatbook is developing a suite of online threat solutions for businesses. Right now, it is providing a free domain name service (DNS) to companies during quarantine, to help protect remote workers and networks from malicious software and security attacks. An ideal solution for businesses of all kinds but especially for SMBs, when work and lives have moved pretty much online all the time.

Two startups reducing the strain on call centers

Startupbootcamp alumnus, Spixii is well-known for helping many incumbent players create more value from internal processes by optimizing staff engagement. Most obviously, the company’s chatbot is designed specifically to make call centers more efficient and speed-up claims handling by channeling validated claims to the best experts.

Now, with the need for social distancing and for people to work from home, Spixii’s chatbot is a great option for insurers’ call centers looking to reduce the need for people to come in to work – while still offering a good service for customers.

And if we agree with the FCA’s stress on the importance of fast and efficient claims processing for SMBs, then call center streamlining should be of particular benefit to small and micro businesses both now and in the coming months.

It’s the same for alumnus PicUp, a communication service that allows insurers to personalize their outgoing calls, while also making it easier for users to get through when lines would otherwise be busy. This is another way of helping SMBs get fast access to their insurers when making claims.

As Lior Shacham, PicUp CEO says: “Pure digital engagement is great, but many services and sales activities require human guidance, so our solution enables and combines remote human interaction and digital assistance, which is a great fit with current market wide issues.


For gig economy workers:

Per-hour gig economy insurance scaleup offers free cover to the infected

Zego provides an online platform to purchase on-demand motor insurance for drivers – such as those working for Uber and Deliveroo – who can buy insurance on a per hour basis, purely for the time they are delivering goods.

CEO and co-founder Sten Saar – former operations director at Deliveroo – recently announced 14 days’ free cover for their customers – “to help alleviate any financial strains felt by our customers who are unable to earn money” due to falling ill with coronavirus. The team is also helping to relocate drivers to logistics and transport jobs to ensure they can continue working during these difficult times.


How incumbents can support SMBs in the months ahead

Essentially, I see three ways for incumbents to learn from covid-19 and support SMBs.


Lesson 1: Think like a small business

The first lesson from the responses of many of the startups I’ve mentioned is that they think like SMBs because they are SMBs themselves – or were recently. They shape and deploy solutions quickly to support others in their network and ecosystems like peers. When talking to insurers there is certainly a need to find relevant and resilient solutions fast. Being able to accelerate the problem-solution matching processes are even more needed right now.

Matthew Reed, CEO of Equipsme highlights this well: “We’re an SME. There are tough times ahead for all of us. But we think it’s up to businesses to now step up with what they’ve got and do what they can.


Lesson 2: Prepare for future shocks

As well as supporting SMBs, incumbents also need to be mindful of the risk to themselves. One problem here has been lack of preparedness.

As this article points out:


Despite a global pandemic being voted the biggest risk to the industry in a poll of insurance executives in 2013, many insurance companies seem to have taken little action in the interim to prepare for it.” We have indeed seen 1) many insurers trying to re-allocate technological assets to front end staff 2) sales agents unable to operate and 3) claims and call center agents overwhelmed by call volumes. Operational digitization is not just nice-to-have any longer.

Lloyd’s of London’s Realistic Disaster Scenarios do include “pandemic risk” in its January 2020 scenario provision “as one of the options” to be selected among a few alternative risks.

I hope this crisis will be a wake-up call to the industry to review stress testing capabilities, processes, structures, automation activities and digitization frameworks for overall preparedness in order to enhance internal awareness of emerging risks and plan accordingly.

For example, as Spixii CEO Renaud Million points out:


“The coronavirus crisis showed that a huge effort was required to adapt insurers’ existing customer-facing processes from office to home working. Now they’ve done it to ensure business survival, insurance leaders have become aware that such processes are probably not sustainable in a world post-coronavirus. The need for digital, personal – yet robust, secure and scalable – solutions is felt more than ever. And making the transition requires acting fast.”


Lesson 3: Invest in or partner with emerging risk predictors

Lastly, just as InsurTech, HealthTech, WealthTech and FinTech startups have led the way in responding to covid-19, so can incumbents look to those digital players that can help them to better prepare for any future pandemics – or, indeed, any similar unexpected yet large-scale disruptive events.

For example, Praedicat, a startup that offers risk analysis for liability insurers and reinsurers had already started to investigate the impact of pandemic events. Their patent-pending technology extracts data from the scientific literature on emerging risk, and then incorporates economic models and legal reasoning into its analysis. As Praedicat exists the recent Lloyd’s Lab, we look forward to seeing the analytical innovation and insight they deliver as we plan better for pandemic and other emerging risks.

Startupbootcamp Alumna Shruti Rao and supply chain expert founded Adapt Ready in 2015 to access and analyze massive volumes of data – in real time – to monitor how issues such as weather, terrorist incidents and, yes, pandemics, can affect the insurance value chain.

Adapt Ready’s cognitive intelligence platform allows customers to visualize, manage and report operational risks from extreme disruptive events. The platform leverages external data sources and advanced algorithms to quantify and provide insight from interconnected supply chains and other emerging risks and integrates them within key processes.

So, in short, the impact of covid-19 may be hard to predict. But two things are certain: SMBs will be needed to help the global economy recover, and they will need insurers to support them.

Hopefully, the long-term impact of the coronavirus will be to inspire incumbents to work more effectively with SMBs. And for that, insurers have plenty of examples from strong, innovative and resilient startups they can follow. Let us hope they do so.


By Sabine VanderLinden