Managing the return to new normal

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As the UK’s national vaccination rollout continues and the country moves closer to a planned June date for ending restrictions, a number of critical support schemes are coming to an end.

One of these is the trade credit insurance scheme, which was introduced in May 2020 to provide indemnities to specialist insurers exposed to the risk of customer defaults. However, it is currently scheduled to end on 30 June.

A number of other schemes will be ended at the same time – the moratorium on evictions for commercial renters, for example. Meanwhile, others will be gradually wound down. The wage furlough scheme, currently set at 80% of a usual salary, will be reduced each month as of 1 July.

As some sense of normality returns, we will all face adjustments. These include reducing habits that became routine during the pandemic, from the use of wage subsidies to overindulgence on mail-order retail. As of April 2021, Amazon Prime membership had grown to 200 million worldwide, a 33% increase since January 2020.

Insurers will have a vital part to play in managing this transition to a genuinely ‘new normal’.

The financial challenges will be especially steep for smaller companies, which have been more reliant on state support than large corporates. This includes the cost of business insurance, which has risen in the last 18 months.

The insurance industry has seen its reputation tarnished during the pandemic. There have been substantial payouts during the last 18 months but the controversy over business interruption claims has dominated headlines.

Premiums have also gone up and recent research revealed that a worrying number of UK SMEs have turned to credit cards to meet their increased business insurance costs, or decided not to buy insurance at all.

The last thing those SMEs need now is to see the availability of insurance decrease while its cost increases.

The pandemic has created some complex new risks that will require cooperation between governments and insurers, from the establishment of a ‘Pandemic Re’ to generally building more resilience into the commercial infrastructure.

Meanwhile, various insurance industry groups are setting out their agenda for post-Brexit regulatory reforms.

But amid these ambitious, high-profile projects, the fate of the SME sector cannot be forgotten or neglected. To ensure that companies don’t flounder because of their insurance costs will require some frank and open engagement between corporates, risk officers, insurers and brokers.

After all, relying on your credit card to pay for your newfound addiction to Amazon Prime is one thing, but to max it out while trying to meet the commercial insurance payments necessary to keep your business open is quite another.