Straight from the Editor’s keyboard;
I walked past a small hairdressing salon yesterday in Horwich on the way to the Co-Op. On the roller shutter a piece of A4 summed up broken dreams, financial distress and a sea change in retailing. `We are sorry to announce that from 26th March we are closing down, thanks to customers for their support, and Amanda will be working at XXX salon elsewhere, if that opens in April’ was the gist of it.
OK, you’re thinking, it’s not Wetherspoons 40,000 workers, Intu’s Malls going into administration or Laura Ashley finally going under. But large, medium and small retailers alike are all suffering and many will simply close forever. Apart from food and drink outlets, many UK High Streets are little more than a sad parade of betting shops, charity, convenience stores and vape/CBD sites.
Insurers need to face the reality that bricks and mortar Commercial insurance is going going to drastically shrink in 2020 and a great chunk of business revenue is never coming back. The very nature of the greatest perceived risk to almost any business has changed fundamentally.
The Centre For Retail Research predicts that some 20,600 High St shops will close for good this year, with around 235,000 jobs lost. Many of those shops will be small independents; jewellers, butchers, shoe repairs, clothing, bookshops etc. As Britons discover remote working and less commuting is actually quite good for their general health, High St footfall will drop still further, and online shopping will continue its inexorable rise.
The Moon in June – Rishi’s Help for Self-Starters is Too Late
Let’s be blunt about yesterday’s help for the UK’s 5 million self-employed announced today by Rishi Sunak: It’s welcome for many people, but for millions of part-time self-employed workers, sole traders and start-ups especially, it is simply too late. Revenue has stopped abruptly, bills need to be paid, people are applying for jobs at supermarkets.
Looking online earlier today, it is clear that many sole traders, agency workers, freelancers etc have already taken the decision to walk away, and worryingly for the insurance industry, they will NEVER fully trust insurers or the government again.
A social contract has been ripped up and binned here. Entrepreneurs have been visibly shoved to the back of the queue in a country which was once a byword for small business, retailing, trading and low cost services. The people first in the queue for help during Corona are those on benefits – no financial disruption for them, no loss of revenue – then the employed, and then finally the movers and shakers who try to get things done from scratch.
The government treatment – and the online abuse – being dished out to the self employed, sole traders and micro limited companies right now is a huge disincentive to anyone contemplating risking their life savings by starting a business. Long term, this is bad for Britain.
In short, many people who are life’s risk-takers, innovators and hardest-working, are watching their dreams go down the pan this summer. Many of those people will not want their fingers burnt again by buying/leasing a vehicle, buying stock, borrowing money using asset secured bank loans, paying overheads on premises, accountants, hiring/managing staff, business bank charges, organising events and marketing etc.
When Rishi Sunak reminds everyone that any financial help will mean the self employed will pay the same tax and NI as the employed, the message is clear; the small trader must bear the same costs of paying into the system, without getting the same benefits and rights as the employed. Economic apartheid.
PAYG Commercial Cover is The Way Ahead
Commercial insurers need to radically overhaul their offer to those willing to take a big financial hit this year and stay in business. Online portals, switchable cover with no MTA fees, and a clear list of exactly what is covered in every policy. Those who can stay in business during the coming recession will need to constantly re-think their marketing, key clients and invoicing practice. Insurers and brokers will need to work hard to persuade entrepreneurs that they offer flexible, genuinely useful services – not just a tickbox product that complies with the law.
To be honest, anyone with cash in the bank is likely to try and hang onto it right now, not spend it. That will make the marketing of add-ons like cyber, critical illness, directors liability, HMRC investigations etc tougher because few people will believe that our industry will actually pay up when the chips are down.
Just as personal and lifestyle data is transforming the car market, people in business are working at home some of the time, or at an office/industrial unit, or a client’s site another day, and so they need a truly customisable type of cover. You might want casual staff covered on-demand via smartphone login, family members property covered sometimes for Christmas stock storage etc.
There are many opportunities for progress in Commercial, even though the market will be tighter. Insurers and brokers have to think like a business person risking everything, every week. Offer products that match the business niche as closely as possible. Otherwise many small traders will simply run their business as a sideline gig, buy the bare legal minimum of insurance, and take their chances.
If neither the State nor their insurer will pay when the chips are down, then many self-employed people will figure `what’s the point of trying to build this business up?’
Trust works both ways, trust is the foundation of all business – and has be earned. This is the year the insurance industry needs to raise its game for the small businesses of Britain.