Findings from GlobalData’s 2020 UK SME Insurance Survey indicate that 38.4% of SMEs would be interested in purchasing insurance that protects them from losses incurred from pandemics. There is clearly a potential market for pandemic cover but further research indicates that the premiums SMEs are willing to pay vary considerably.
The lockdown measures enforced by the government as a result of COVID-19 have affected the operations of SMEs considerably. The forced closure of non-essential business will have resulted in some to cease trading temporarily or adjust their operations to enable social distancing. Given the impact, many will have incurred losses that fall outside of the scope of traditional business interruption policies, leaving them to pick up the bill. This is where pandemic cover can make a difference.
The charts below indicate the interest to purchase an insurance product that protects against the losses incurred by a pandemic among UK SMEs by business size, and the extent to which their operations were impacted by the lockdown measures. The highest level of interest for such a product 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 on average.
Should the insurance industry look to develop such a policy for the SME market there greatest level of uptake would be found in the small to medium sized business area, as the percentage of micro & 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 pat the least in premiums, the market would likely be unsustainable for many insurers given the high level and cost of claims should a pandemic occur.