Why business insurance is more important than ever

  • Describe some of the protection challenges that Covid has thrown up
  • Identify some of the considerations in an adviser's protection proposition
  • Explain the position of children on their parents' critical illness policies
Why business insurance is more important than ever
Prexels/Rebrand Cities

As Napoleon once said in 1794, Britain is a “nation of shopkeepers”.

This was interpreted as an insult, but Napoleon insisted that our enterprising attitude is the spirit of the English and that the key to British success is the people who power our economy.

Over two hundred years later and it is clear to see that Britain has remained a nation of shopkeepers, albeit maybe not a pandemic-proof one.

Britain has been no stranger to epidemics and pandemics over the centuries; for example, the cholera pandemics, Russian Flu, Spanish Flu, the Plague pandemics – all of which had catastrophic effects on British businesses.

The cholera outbreak of 1832 saw the imposition of familiar instructions such as general businesses to shut at midday; publicans warned to close their stores at dusk; and schools dismissed.

So, while our healthcare system may have improved, our approach to protecting businesses has perhaps remained a little archaic.

Business Interruption Insurance is an area of protection that has plagued consumers with concerns over the years, perhaps due to cost and complexity.

Independent research conducted by Consumer Intelligence found that of the businesses surveyed, 19 per cent had cancelled their Business Interruption Insurance policies for these reasons, and ironically to keep them afloat.

Conversely, the All England Lawn Tennis Club (AELTC) has famously filled their pandemic insurance protection gap by purchasing £1.5m of pandemic insurance each year since 2003 following the SARS outbreak.

The AELTC is now looking at an insurance pay out of £114m due to the effects of Covid-19 on last year’s Wimbledon tournament. Could we start to see this insurance become an essential risk mitigator rather than a niche product from now on?

The Balance

Members of the Association of British Insurance (ABI) expect to pay up to £2.5bn in Covid insurance claims incurred in 2020, £500m of which is made up of general insurance, travel insurance and income/health insurance, with the remaining £2bn relating to business interruption claims.

This is a colossal amount of money for the insurers to pay out at once and a lot of premium for businesses to pay until they receive government support, so how is this area of insurance being future-proofed?

The US are making headway with insurtech start-up Thimble, which has partnered with the Lloyd’s Lab accelerator programme to develop an insurance solution to address the pandemic coverage gap of small businesses during lockdowns.

It will do this by developing a low-limit parametric contingent business interruption coverage that would pay out programmatically and instantly if criteria are met.

This staggers insurer payouts and makes business protection more accessible, along with serving as a ‘first line of defence’ for small businesses once the parameters of the insurance are met.

Government Assistance

It has surpassed a year since the introduction of the Chancellor’s coronavirus loan schemes, and March 31 2021 marked the deadline for any new applications to these - namely the Bounce Back Loan Scheme (BBLS); the Coronavirus Business Interruption Loan Scheme (CBILS); and the Coronavirus Large Business Interruption Loan Scheme (CLBILS).