More than one in 10 UK SMEs have cancelled their insurance because of COVID-19
11.4% of UK SMEs ended up cancelling at least one of their insurance policies because of the COVID-19 pandemic, according to findings from GlobalData’s 2020 UK SME Insurance Survey. With no end in sight and COVID-19 cases continuing to rise once again, more policies could be at risk of being cancelled in the near future.
Cost-cutting was the driving force in the decision to cancel policies across the majority of insurance products featured in the survey. However, SMEs cancelling their business interruption policy as a result of COVID-19 were most likely to do so because the product did not offer the level of cover they thought it did. Rejected COVID-19 claims were the second most common reason for cancelling business interruption insurance among SMEs. This highlights the impact that a negative claims experience and unclear policy wording have on SMEs’ insurance decision-making.
A further 9.6% of SMEs are considering cancelling at least one of their existing policies. Cost is once again the driving factor behind this consideration. Fieldwork for the survey was carried out in August 2020, before lockdown measures were reintroduced locally. With the prospect of more lost business looming in certain areas and industries, the number of SMEs considering cancelling policies could indeed be higher today than it was when data was collected.
With businesses continuing to face high levels of uncertainty in an unstable economic environment, the potential for policy cancellations will remain for some time. While these are difficult times for everyone, insurers should develop lower-priced products that offer businesses the right level of cover they need while simultaneously highlighting the need for businesses to keep cover in place. This way, businesses can reduce costs while remaining protected for select areas, and insurers can keep their existing customers and continue generating income from premiums.