A new report reveals that the financial impact of Covid-19 has knocked renewal pricing down in the list of priorities of SMEs hit financially by the pandemic and associated lockdown measures

Small and medium-sized enterprises hit financially by Covid-19 saw issues of advice and clarity as more important than cost (Credit: PxHere)

The priorities of small and medium-sized enterprises (SMEs) have changed significantly since the Covid-19 lockdown disrupted trading and had a financial impact on most businesses.

This is according to the latest Public Trust Index report released by the UK Chartered Insurance Institute (CII), which found the greater the impact on finances of an SME, the more they became concerned with the immediacy of claims advice and assistance, as well as the ease with which their policy could be understood.

In its report, the organisation found almost 88% of SMEs felt their financial situation was either somewhat (57%) or significantly (31%) impacted by the global pandemic, leaving just 12% who believed they’d experienced no impact at all.

For those businesses impacted significantly, the CII analysed survey responses and gave an importance score of 8.14 to the ability of a policy to allow firms to continue trading, and a score of 7.73 to the need for insurers to give them speedy advice and assistance during a claim.

covid-19 SMEs financial impact
The CII Public Trust Index gives an opportunity score based on the importance of an issue and how respondents feel their insurer performed in relation to their expectation (Credit: CII Public Trust Index 2020)

Chartered Insurance Institute director of policy and public affairs Dr Matthew Connell said: “Firms that are affected by coronavirus are becoming more concerned about exclusions in their own policies, especially around liability and property insurance.

“If we, as a profession, don’t rise to the challenge of improving understanding among SMEs, we risk moving into a ‘forced trust’ position where they no longer trust that the policy will protect them adequately, but continue to rely on it because of a lack of alternatives.”

Given the growing ambivalence towards insurance companies over mounting denied business interruption claims throughout April, the month the CII surveyed businesses, it’s unsurprising that SMEs cited more concern about what their policies covered.

But Dr Connell believes the way insurers handle claims during this period of disruption will have a long-term effect on the degree to which the industry is trusted.

dependent life insurance
Chartered Insurance Institute director of policy and public affairs Dr Matt Connell (Credit: CII)

“SMEs understand the value of insurance, but they want a better conversation about how to manage risks,” he said.

“The way in which insurers manage the effects of the coronavirus is going to have a lasting impact on trust in the profession, especially for SMEs, who have a higher level of dependency on their protection during significant business interruption.”

Although it didn’t rank in the top three concerns of businesses hit financially by the pandemic, the issue of renewal pricing had the highest opportunity score – obtained by adding the difference between the figures for importance and performance to the importance score.

According to the CII, this suggests that when SMEs are considered in aggregate, the issue of renewal pricing is still the area in which businesses see the biggest contrast between what they see as important and how closely insurance firms meet this expectation.

covid-19 SMEs financial impact
When not split by financial impact, SME responses resulted in the highest opportunity score for issues around renewal pricing (Credit: CII Public Trust Index 2020)


CII recommendations to insurers looking to restore the trust of SMEs experiencing a heavy financial impact from Covid-19

After assessing the results of its study, which included 1,000 SMEs, the CII laid out the following recommendations to insurers looking to retain SME trust:

•  Find better ways to address the issue of renewal pricing. Initiatives, such as the ABI/BIBA Guiding Principles and Action Points for General Insurance Pricing have resulted in a gradual improvement in SME’s perception of how insurers reward loyalty.

•  Improve advice processes (and non-advised buying processes) to ensure clients understand both the insurable and non-insurable risks that they face, and what they can do about each one.

•  Reach negotiated claims settlements wherever possible. There is still scope for firms to reach agreements with clients about the level of assistance they can give. Assistance given at an early stage will build more trust than compensation given at a later date.