This has been a budget with a commitment to providing ongoing financial support for people and businesses during the remaining stages of the pandemic crisis. Although welcomed by many, it’s vital that companies and individuals continue to look for additional ways to preserve cash flow, enabling them to be more adaptable and to spend capital where it’s needed most in these challenging times.

Businesses

Our nation’s small and medium-sized enterprises (SMEs), who number some 6.0 million and who account for over 99% of businesses in the UK (2020)* have suffered significantly during the pandemic. As a result many have welcomed the ongoing support packages outlined by the Chancellor in the budget which will help those affected to remain afloat, stay strong to survive Covid-19 and enable them to look to better times ahead.

SMEs, a key source of business for Commercial Lines brokers, are often described as the ‘Life blood of the British economy’. Despite showing great resilience during this pandemic year a recent Office of National Statistics survey (published 11th February 2021) illustrated the stark realities for small businesses:

• 25.6% of SMEs have seen a decrease in profit of 20% or more against budget for YTD
• 47.5% of SMEs have stated their cash reserves will last 6 months or less
• 13.9% of SMEs have stated a low or no confidence level of their business surviving in the next 3 months

Despite the many support packages the government has continued to provide, in full and then in a tapered manner, it’s never been more important for SME’s and larger businesses to preserve cash flow, to give them every opportunity to bounce back, strengthen and grow.

Continuing insurance cover and the protection it affords is an essential element to ongoing prosperity for SMEs although insurance premiums are a significant outlay deterring some firms from taking out adequate cover. As reported in last year’s Premium Credit Insurance Index 51% of SMEs had stopped paying for a range of business insurance policies with employers’ liability insurance the most cut from a list including business property cover, professional indemnity and cyber. Nearly one in five (19%) of SMEs stopped paying for business interruption insurance. This risk to businesses can however, be easily addressed through an alternative way of paying for cover.

Commercial brokers are increasingly offering businesses the opportunity to manage cash flow more effectively through Insurance Premium Finance (IPF). This alternative payment method has an important, ongoing role to play allowing vital insurance covers to be obtained through convenient monthly payments rather having to pay in one, annual lump sum. Spreading payments like this, helping give access to insurance cover when it’s needed, and at the right levels, has never been more relevant. Brokers too have an opportunity to create and develop an additional income stream through commission opportunities by consistently offering an IPF payment solution to their customers.

Consumers

The same principals apply for consumers too. Managing personal and family finances has become more of a challenge during the pandemic. Working age households' came under the biggest squeeze since 2013 during the last three months of 2020, according to a report from Scottish Widows. Unsurprisingly, the findings largely reflect sustained pressure on incomes during the coronavirus pandemic, according to the report. The Premium Credit Insurance Index also illustrates the economic pressures increased in relation to individuals, indicating that 19% of consumers have cancelled or cut policies directly as a result of the pandemic. While travel insurance was the worst affected, customers have also cut important home and car cover as well as pet, life and health.

Again personal lines brokers can offer Insurance Premium Finance so consumers can pay for cover in convenient monthly payments and retain cover. Premium finance, which for a small charge, enables consumers to pay monthly for cover instead of in a lump sum. Currently only some 7% of consumers say they do so. Spreading payments in such a way can help alleviate cash flow challenges, make paying for vital insurance simpler and in such an underdeveloped market, brokers have significant scope to offer this payment method, providing enhanced customer service as well as commission opportunities.

Covid-19 and the budget

The pandemic has created the necessity for a budget like never before. Many businesses and consumers are relieved that financial support packages remain in place for some time to come enabling financial recovery. We will also continue to offer award winning premium finance solutions to help facilitate this recovery.

We can all play our role in keeping the cogs of industry turning by offering access to the vital insurance covers which are needed more than ever right now. We look forward to developing deeper relationships with the broker community; helping grow our partners’ businesses and collectively entering a post pandemic era together, in the strongest way possible .

Your Premium Credit contact will be pleased to speak with you further.

*McKinsey.com