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Only 20% of Middle Market Companies Heavily Rely on an Agent or Broker to Understand and Manage Risk

With high exposure to key risks, middle market companies are missing out on mitigation advice from insurance experts, says Chubb survey.
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only 20% of middle market companies rely on an agent or broker

Even though 68% of middle market companies say risk management is extremely or very important to their overall firm, only 20% rely heavily on an insurance agent or broker to understand and manage risk, according to results from Chubb and the National Center for the Middle Market's Middle Market Indicator (MMI) report for May 2021.

As middle market companies look to the future, businesses must navigate the enduring impact of COVID-19. Of respondents, 43% report that the pandemic will have a negative long-term impact on their supply chain, and 60% have had to make "extreme" or "significant" long-lasting changes to their workplace due to safety concerns.

On average, middle market gross revenues are down by 1.2% for the past 12 months with nearly 2 in 5 companies reporting revenue decline, the report said. Employment declined 2.2% during 2020 with approximately a third of companies reducing the size of their staff.

Further, the proportion of companies that introduced new products or services over the past 12 months or that expanded into new markets continued to decline, while the number taking on new debt increased.

Amid the impact of the coronavirus pandemic, middle market companies are exposed to other key risks—especially concerning given the low percentage that rely on risk mitigation from an insurance expert. Less than half of middle market companies say they are completely or very prepared to respond to prolonged power outages. And less then half say they're completely or very prepared to handle physical damage from water or fire.

However, executives believe the middle market will experience positive, if modest, revenue and employment growth in 2021. The proportion of firms expecting to expand domestically in 2021, along with the proportion intending to open a new plant or facility, are up from six months ago.

But not all companies will share in this forthcoming growth story. Just 44% of all middle market business leaders say they expect to increase revenues in 2021, while 33% expect to create new jobs. Service companies, including business, professional, and technology services organizations, have the strongest predictions for the year ahead.

This optimism is tempered by caution, with 2 in 5 executives saying they would hold onto cash instead of earmarking it for future investments. The investors, however, are most interested in information technology, perhaps out of necessity as they continue to look for ways for employees to work remotely.

"The future looks positive for middle market companies, but there is a long road ahead of them," said Ben Rockwell, division president, Chubb Middle Market. "A critical part of that journey will be assessing how their property and casualty risks have evolved in light of the pandemic."

“Whether revisiting business continuity plans or providing employees with resources to help set them up with an efficient ergonomic workspace at home or in the office, companies which acknowledge where they were unprepared ahead of the pandemic and implement lessons learned will be best positioned for future success," he added.

Will Jones is IA editor-in-chief.

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Monday, June 14, 2021
Commercial Lines