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

Together with the Coronavirus Job Retention Scheme (CJRS), this is being described as the biggest national income protection that our country has ever seen and is being positioned as such by insurers to highlight the value of protection. 

What is more, clients have been living in that real life “what if” scenario that advisers have been asking clients to envisage.

The CBILS was the original scheme introduced on 23 March 2020 to provide finance to small business owners in the UK with cashflow issues and loss of earnings, with an 80 per cent government guarantee of any defaulted money to the lender.

CBILS are repayment loans of up to £5m for six years with the first 12 months being repayment and interest free and were heavily available through banks and lenders with interest rates between 1.4 per cent - 8.9 per cent depending on the risk profile of the borrower.

To have been eligible, a business needed to be UK-based with less than £45m annual turnover and they must have been viable in 2019 with the ability to prove that their business was interrupted by coronavirus.

What are the figures showing now?

As of 21 March 2021, scheme statistics show that there had been 98,344 approvals out of 233,247 applications, amounting to a total of £23.28bn in CBILs alone. As at the same date, BBLS total £46.53bn and CLBILS at £5.30bn.

The Warning

Last year, TheCityUK Recapitalisation Group, which is supported by the likes of EY, Lloyds, L&G, Zurich, LSE, AIG, put together a think tank to collate responses and advice to government around helping businesses to recover and recapitalise following Covid-19.

What followed was a report warning that government-backed business loans could turn toxic by 2021 as businesses could face an unsustainable debt burden of up to £40bnBusinesses are now reopening, and it is apparent that some have taken on debt for the very first time.

Economic forecasts suggest that over the next 12 months these businesses will face tougher trading conditions than before Covid-19, making it harder to service both existing debt and any additional debt taken to weather the crisis or restart their business, thereby compromising the growth and viability of their business.

What does this mean?

It means the opportunity to help business owners protect their families, their employees and their businesses is bigger than it has ever been before and that the financial architects and merchants of wisdom of our industry who are supported by market-leading and well-designed propositions are in the best position to bridge protection gaps and help reduce the burden of financial stress, which in 2019 cost the economy £121bn.