Government support for self-employed hit by Covid-19 brings relief to insurers

The insurance industry has voiced relief as the UK government unveiled plans yesterday to back self-employed people impacted by the coronavirus pandemic.

Chancellor of the exchequer, Rishi Sunak said the self-employed ”have not been forgotten” as he announced that they can now apply for a grant worth up to 80% of their average monthly profits.

The new self-employed income support scheme will offer a taxable grant worth 80% of average profits over the last three years.

There is up to £2,500 available per month to be paid in a single lump sum, but this will not arrive until the start of June at the earliest.

The announcement comes days after financial support was unveiled for small businesses.

It follows a surge in demand for freelancers and the gig economy that are classified as self employed has been seen due various social distancing and self-isolation measures put in place to mitigate the risk of coronavirus spreading.

But this means that those that insure them have also come under pressure as the frequency of work increases, and so does the amount of risk for these workers which could lead to more claims should they fall sick.

And the eligibility criteria for the new self-employed income support scheme excludes some that do not fit the model.

Sigh of relief

Keith Richards, managing director of engagement for the Chartered Insurance Institute, said the announcement comes as a “huge sigh of relief to many across the country and its membership, and that it is something many had been calling for over the last few weeks.

“Coupled with the interventions made already for small businesses and employees, this offers an unprecedented level of support to insurance businesses, at a time when many will be feeling the sharp economic effects of this crisis,” he said.

Janthana Kaenprakhamroy, chief executive and founder of on-demand insurer for the sharing economy, Tapoly told Insurance Times that the chancellor’s efforts to help and support the self-employed through this difficult time is “certainly positive”.

Exclusions 

Although Kaenprakhamroy said, “it does leave some of those who don’t meet the eligibility criteria in a devastating situation, for example those who have just started being self-employed”.

This is because the scheme’s £50,000 cap on profits, and its other exclusions, will mean that not everyone will be supported, and we understand the need for the government to target help for individuals facing extreme financial pressure, Richards added.

Meanwhile Kaenprakhamroy said that Tapoly has seen an uptick in insurance cancellations as well as some claims queries for small businesses and freelancers, “so we know that this market segment is being hard hit by the coronavirus pandemic”.

Tapoly provides specialist commercial insurance products on-demand, specifically for self-employed, SMEs, freelancers and gig workers.

“Having said that, we are also seeing significant increase in demand for business interruption and medical malpractice policies. I expect prices for some types of insurance products to go up due to increased claims during this period, which no doubt will have a knock-on effect on the premiums, and consumers could end up bearing the cost, she said.

“So, this government funding provides essential help and support to our freelancers and small businesses through the crisis.

”We are also working hard to find ways to relieve the pressures that our customers might be facing as we remain committed to continue protecting the self-employed, SMEs and gig workers, particularly now at such critical time, by offering flexibility and protection when they need it.”

Key role

Richards said: “Insurance plays a key role in society as well as the economy and the CII, through our dedicated Insurance Societies, will continue to keep the needs of consumers and the profession clearly on the radar of policymakers at a time when they are also impacted by the current challenges facing every profession.

The CII will continue to monitor the situation and raise issues with the government and regulator where it is in the public interest to help firms – either financially or through other means – to provide key support for consumers.

“We will do all we can to support those who are excluded, just as much as those who will be waiting for this new system to be up and running and for payments to begin, to ensure we continue to have such a vibrant, innovative marketplace,” he added.