08 Dec 2020
Posted in Insurance
Employers’ liability insurers losing customers due to COVID-19 should prepare for tough 2021, says GlobalData
The COVID-19 pandemic has caused a rise in cancellations and switching employers’ liability products and more disruption is set to occur in 2021 as economic impact hits, according to GlobalData, a leading data and analytics company.
GlobalData’s 2020 UK SME Insurance Survey found that COVID-19 caused 14.8% of respondents to cancel their employers’ liability policies in 2020. Furthermore, 58.7% of those who switched employers’ liability provider in 2020 did so because of the pandemic; comprising 34.8% saying that COVID-19 was a contributing factor but not the sole reason, and 23.9% switched purely because of the pandemic.
Ben Carey-Evans, Insurance Analyst at GlobalData, comments: “Employers’ liability insurance is a legal requirement for businesses in the UK, so SMEs cannot cancel it as a cost-cutting measure just because budgets are squeezed. However, other factors arising from the pandemic – such as rising unemployment and increasing company liquidations – mean the size of the market for employers’ liability insurers will shrink.”
The furlough scheme is set to continue in the UK until March 31, 2021. This means that even companies not needing to make redundancies yet can reduce their employers’ liability costs, and potentially delay renewals, until staff return to work. There is an expectation that unemployment will rise once the furlough scheme ends, with the Office for Budget Responsibility forecasting that the unemployment rate will hit 7.5% in the middle of 2021.
Carey-Evans adds: “This will trigger more COVID-19-related cancellations of employers’ liability policies. Therefore, commercial insurers need to prepare for a tough 2021 – even as we continue to see positive news regarding vaccinations.”