Blog: No end in sight to current lockdown adds to the stress for SMEs

In the world of business, it is small to medium enterprises (SMEs), the back-bone of British commerce, that have borne the brunt of the commercial issues caused Covid-19 in 2020.

Any optimism that came with the new year has been short lived for these businesses as the latest lockdown has put them under yet more stress.

Needs
This stress is based on the most basic of needs, their ability to survive. Research done by Aviva during the last lockdown found that on average, SMEs said their business would only be able to survive for six and a half months if there were further restrictions.

With the recent announcement in Parliament that lockdown restrictions could continue until 8 March this fear is in danger of becoming a reality.

SMEs have shown impressive resilience throughout the pandemic.

Aviva commissioned Censuswide Research to conduct a poll of up to 504 SME senior decision makers across the UK in November 2020.

Over two-thirds of them (69%) diversified their business in response to the Covid-19 restrictions with 46% increasing their online operation, 35% offering a new product of service and 27% changing their product or service offering.

Brokers
I have seen many examples where we have worked with brokers and their clients to adapt policies and ensure they have coverage in place to reflect their changed business.

For example we have applied automatic cover extensions for people working from home and temporarily unoccupied premises, provided risk management advice to conference centres converting to Nightingale Hospitals and where taxi drivers have switched their business model away from carrying passengers to delivering food we have extended cover to include these activities at no extra cost.

The early engagement with brokers here was key as it helped to keep businesses trading without risking their cover.

Impact
As an industry it is heartening to see that brokers and insurers can make an impact while having to spin the plates of remote working, home schooling or caring for people in their bubbles like everyone else.

Whatever changes SMEs made, they had to be done at pace as UK Governments reacted to the spread of the virus in different ways. This was reflected by 35% of the businesses that made a change telling us that, until the pandemic struck, they hadn’t thought about the changes they made.

We can see in our own data that only 20% of the SMEs that did make a change updated their cover to reflect it.

In fact, businesses were more likely to update their website (46%), their suppliers (31%), or the location they worked from (21%) before they looked at their cover.

Again this was more common in businesses with a smaller turnover, only 10% of SMEs with a turnover of under £10m updated their cover. This was twice as high in businesses with a turnover over £10m (22%) but it still left over three quarters of businesses without cover that reflected their new operations.

However it is not just the businesses that made a change that may not have the right cover in place.

Risks
Businesses who did not change could still face increased, or different risks. We know that on average SMEs had not updated their insurance cover for two-and-a-half years, and much has changed in that time.

Worryingly this number increased steadily from two years and five months in businesses with a turnover of up to £1m to just over three years in businesses with a turnover of over £50m.

Throughout an incredibly tough 2020 SMEs showed exactly why they are the heart and soul of British business and communities.

2021 has brought with it further restrictions and while the proven adaptability of SMEs in the face of constant change is admirable it is imperative they ensure their insurance cover reflects any changes they make.

It is crucial that SMEs spend time with their broker to review how the pandemic has changed things for them, be that the market around them or changes they have made to their business.

With a further delay to the UK returning to something like a pre pandemic normal SMEs must be able to trade with the confidence that they are covered for whatever 2021 holds for them and a conversation with their broker will be key to doing so.

Dave Carey is director of mid-market trading and specialty lines at Aviva