NIBA CEO, Dallas Booth has expressed his views on the current relief proposals that insurance companies have announced in the wake of the COVID-19 crisis.
The IAG Group (including CGU) have announced a number of initiatives to assist SME businesses experiencing difficulties as a result of the current economic conditions. The ACCC has given interim authorisation to a set of proposals from Suncorp, QBE and Allianz.
Each of these sets of proposals include the potential for small business policyholders to defer payment of their premium for six months.
Taken very broadly, Booth believes that the insurer proposals appear to give broker clients the following options:
- Payment of the premium on renewal;
- Funding of the premium in the normal process, using insurance premium funding products;
- Payment of the premium 6 months after renewal;
- Other arrangements that may be agreed between the broker, the client and the insurer.
He said, “There have been many comments to the effect that clients will simply defer payment of their premium for six months. The real question is: what is best for the client?”
“We currently have very difficult economic circumstances. Clients facing renewal of their cover over the next three months will most likely be facing very different issues and very different trading conditions than were the case when their current insurance program was put in place.”
According to Booth it appears that brokers will have to have detailed discussions with their clients, well prior to renewal, to ascertain:
- What is the current state of their business? Are they still trading, or have they been forced to close their doors because of government action or as a result of the current economic environment?
- What are their plans for the next 12 months? What is their business likely to look like in three months, six months, 12 months? Are they confident they will be able to remain in business, if necessary “in hibernation”, and prepare for a return to “normal” trading when the health restrictions are lifted?
- What type of cover will be needed in the short (three – six months), medium (six – nine months) and longer term (nine months and beyond)? What will be required to cover property, stock, turnover, and the usual liability and other risks the business faces?
- Will the cover needed by the client be available in the market?
- What will it cost?
He said, “It is no doubt in the client’s best interests to maintain appropriate cover while ever the business continues to exist, even if in hibernation. But there will need to be a careful discussion with the client about the level of cover that is needed, and the client’s ability to pay the required premium.”
“One thing is clear: the next three months are going to be exceedingly difficult for brokers, as they seek to give the best advice they can, and get the best cover their clients can afford.”