Shield Your SME Clients from Inflation’s Pressures

Inflation has surged in recent months, hitting levels we haven’t seen in 40 years – and most observers believe it will persist through 2023. While inflation can make life difficult for a business of any size, small and medium-size enterprises (SMEs) may feel the pressures most acutely. They are more apt to have fewer resources to sustain them as they face rising prices for everything from labour to materials. Beyond expenses, the effects of the pandemic and extreme weather on the global supply chain have only magnified the complexity of conducting business.

It’s understandable that in these volatile economic times, owners of SMEs are likely more focused on running their business than thinking about insurance. But the steps they take now to review their exposure to inflation can equip them to smooth out the bumpy months ahead, and that includes how inflation may affect their insurance cover. You can do your SME clients an important service by bringing inflationary risks to their attention, identifying potential gaps and ensuring they have adequate protection in case of an insurance claim.

Help clients understand how inflation affects their business

A confluence of factors is driving the inflation we’re experiencing right now – and these factors weigh on SMEs, particularly when they need to make an insurance claim.

Supply chain challenges have been increasing global demand and elevating costs for materials and labour. As a result, SMEs looking to rebuild physical premises must pay costs that have increased by an average 17.5% in the two years ending in May 2022. As materials and labour costs have climbed, many business owners who have needed to make a building insurance claim have been unable to rebuild their commercial properties because their insurance policies were based on outdated limits. They must also consider the replacement cost of contents, which face similar price increases due to inflation. What’s more, the ongoing delays in sourcing materials have led to extended periods of business interruption, generating more expensive losses.

This comes as businesses face higher operating expenses due to high (and rising) energy costs, increased wages, and higher costs to repair third-party property. If an SME experiences a major property or casualty loss and must take on significant and unexpected costs to manage it, bouncing back from the event can feel like an especially daunting prospect right now.

What insurance built for SMEs can do

At a time when many of the risks associated with doing business can feel out of our control, your SME clients need to best protect what is within their control. That includes their property assets such as buildings, vehicles, inventory and equipment, as well as their loss of income caused when their business is interrupted by an incident.

That’s where our PI Combined and Office products can help. Both products are designed with SME clients in mind and include comprehensive covers for buildings, as well as business interruption, among other protections. They cover property including structures, personal property, lost income and liability to help pay the cost of third-party claims that may arise against your client’s business. What’s more, these products offer significant flexibility, both when it comes to offering cover tailored to specific client needs and to providing the responsiveness you need when you’re looking to quote and bind new business.

Why business insurance premiums are increasing

The insurance your clients purchase for their business has limits on both physical structures and personal property. Insurers generally adjust those limits annually to help keep pace with inflation. That’s why premiums tend to rise during inflationary times – and why it’s also important to review changes to limits to ensure your clients have sufficient protections, particularly given the rising costs of materials and labour.

Help your clients take these actions today

It’s natural for business owners to worry in volatile economic times. But when your clients are aware of the risks they face, they can minimise their concerns about potential losses and focus on running their business. You can help by partnering with them to take these steps:

• Review and update their business continuity plan with them. Make sure they are aware of their potential for generating property, liability and business income losses and how they can minimise their risk.
• Conduct a valuation of the business’s property to clarify your client’s exposures.
• Discuss the limits of your client’s cover and review their PI Combined and Office policies to ensure they have the protection they need in this environment of high inflation.

Learn more about SME insurance from Travelers

You can position your SME clients to succeed. Review the detailed features of our PI Combined and Office products and contact us with questions about getting your clients the protection they need right now.

Travelers’ dedicated team of SME underwriters can be reached from 9am to 5pm, Monday to Friday:

Email: SME@travelers.com

Phone: 0800 587 8360