Over one third (38.4%) of small and medium-sized enterprises (SMEs) in the UK are interested in purchasing insurance that protects them from the losses incurred from pandemics. There is clearly a potential market for such policies but further research indicates that the premiums SMEs are willing to pay vary considerably, says GlobalData.
The lockdown measures enforced by the UK government as a result of COVID-19 have affected the operations of SMEs considerably.
The forced closure of non-essential business has resulted in some to cease the trading temporarily or adjust their operations to enable social distancing. Given the impact, many have incurred losses that fall outside of the scope of traditional business interruption policies, leaving them to pick up the bill.
According to GlobalData’s 2020 UK SME Insurance Survey, the highest level of interest for an insurance product that protects against the losses incurred by a pandemic comes from medium sized SMEs, with over 75% of those that had to cease operations fully during lockdown interested in purchasing cover. These SMEs would also be willing to pay the highest premium, with up to £5,031 ($6,529) on average.
Daniel Pearce, Senior Insurance Analyst at GlobalData, comments: “Should the insurance industry look to develop such a policy for the SME market the greatest level of uptake would be found in the small to medium sized business area. This is because the percentage of micro and sole trader sized businesses which had to cease operations completely during lockdown that would be interested does not exceed 50%. Combining this relatively low level of interest with the fact that they would be willing to pay the least in premiums, the market would likely be unsustainable for many insurers given the high level and cost of claims in times of pandemics.”