Brokers are facing declining trust levels following the Hayne royal commission, and more businesses are buying at least part of their cover in the direct market, the annual Vero SME Insurance Index released today shows.

Vero says the royal commission’s spotlight on financial services has taken a toll, with 47% of respondents saying recent events had made them more wary of the insurance industry, up from 36% who agreed with the proposition last year.

Further data shows 33% agree that “at the end of the day you can’t trust insurance brokers”, which compares with 16% in 2013, while for insurance companies the response jumps to 43% from 35%.

“The financial services broadly across all of the sectors haven’t had a brilliant year, and trust was also a hot topic for SMEs,” Vero Head of Commercial Intermediaries Anthony Pagano told insuranceNEWS.com.au.

“But for me this is a golden opportunity for brokers to take steps to rebuild client trust by focusing on what they do best. There are so many things that brokers can do about this just by talking to their client more.”

The index, now in its eighth year, surveyed more than 1500 business owners and decision-makers in late September and early October, focusing on purchasing behaviours and perceptions of brokers.

The results showed 36% of respondents used a broker for their last insurance policy purchase, little changed from 37% last year. The level has stabilised in a 34%-38% range for five years after dropping from 44% in 2014.

But the percentage of businesses using both the direct market and brokers to buy insurance has surged, with the trend led by people under 40 years of age.

Some 60% of SMEs buy 1-89% of their insurance through a broker, classifying them as mixed users, compared with 42% a year earlier. For those aged under 40, data shows 78% are mixed users, 13% don’t use brokers and 10% are heavy broker users.

SMEs are tending to buy more complex covers such as indemnity or industrial special risks through brokers while purchasing simpler covers such as motor vehicle or workers’ compensation direct.

“While this breakdown may suit brokerages who prefer to focus on more complex high-value covers, it means that brokers don’t get to manage the whole of their clients’ insurance and risk needs, which impacts their ability to act in a broader capacity as a risk adviser,” Vero says.

The survey found 75% of respondents said evaluating their insurance needs was easy, while 63% said the same for sourcing the right cover. But only 39% agreed that was the case for policy wordings.

“Without broker expertise these ‘too easy’ SMEs are at significant risk of being under-insured or having inappropriate insurance for their needs,” Mr Pagano said. “Those who know insurance understand how intricate it can be.”

On claims, 49% of SMEs were satisfied with their experience, but increased broker involvement correlated with more positive responses.

Mr Pagano says the index results highlight the importance of brokers explaining their role and providing transparency about processes.

“It is really important that brokers reinforce with their clients what it is they do, how they do it and why they do it, and once that story is told customers will understand that they have never been better supported,” he said.