As the insurance and broking industry grapples with the COVID-19 pandemic, businesses and regulatory bodies have worked collaboratively to ease the burden on vulnerable SMEs.
Following the federal government’s announcement of a $15 billion Structured Finance Support Fund (SFSF), which allows smaller authorised deposit-taking institutions (ADIs) and non-ADI lenders to access funding at competitive prices, Suncorp lodged an application for authorisation to allow insurance companies and brokers to coordinate their input on how the scheme will be administered. The move was then supported by QBE and Allianz.
“Suncorp, alongside QBE and Allianz, undertook the ACCC approval process in order to lay a platform for the whole industry, including insurers and brokers, to support the tens of thousands of small businesses who have been heavily impacted by this crisis,” said Andrew Mair (pictured), executive general manager intermediaries of Suncorp-owned Vero Insurance.
“This initial suite of measures aims to provide certainty and flexibility for SMEs. We’ll continue to assess how this crisis is impacting our broker partners and their SME customers, so we can make appropriate changes to provide ongoing support for brokers and their clients.
“We wanted to show insurers would back those in need. Although we applied as three large insurers, we did so in a way that encouraged and facilitated others, including international and small local underwriters, and insurance brokers both big and small, to try and do their part to help SME customers,” Mair continued.
The move will allow the companies to work collaboratively in assisting SMEs to maintain liquidity and issue loans to consumers and small businesses during the economic disruption caused by the COVID-19 pandemic.
“The [SFSF] is likely to be more quickly and effectively implemented when members of the ASF are allowed to work together to support the Australian Office of Financial Management in administering the fund,” ACCC Chair Rod Sims said in a statement.
“It’s also crucial that competition in the loans market in Australia is maintained. The competition provided by small lenders needs to be supported to help mitigate the economic impact of COVID-19,” Sims added.
The sentiment of supporting Australian businesses is also echoed by QBE’s chief customer officer, Jason Clarke (pictured below), who says the industry has worked proactively to develop a package that will provide financial relief for a long-term challenge.
“While there are some reservations from the Industry in relation to short term impacts of the changes that we’ve proposed, I think the industry as a whole recognises that this is not a short-term issue. We are all, together, attempting to support our SME customers – and this is for long term benefit of the industry and society in general.
“The insurance industry recognises the importance of supporting Australian businesses through this unprecedented time and so we proactively developed a package that would provide financial relief for small and medium businesses, while enabling them to maintain coverage under their insurance,” Clarke said.
Ultimately, it means that small lenders, who are relied on by many smaller businesses and individuals, will have quick and effective access to support through SFSF to help ensure they can continue to support businesses through by affordable credit during this challenging time.
“We know that many small and medium businesses are struggling with forced closures, social distancing and other disruptions to the economy. The most recent initiatives we’ve announced are focused on supporting customers, together with our broker partners, in the SME market,” Clarke continued.
Some initiatives introduced by QBE, according to Clarke, include allowing for deferred premium payments, minimising premium charges, offering “laid up” cover for vehicles that are not in current use and premium support for workers’ compensation customers, such as instalment payments and wage adjustments.
“We want to support our customers through this time and the aim of our initiatives are to ensure that these businesses can resume more normal business activity once the worst of the COVID-19 impact has passed,” he said.
Mair, meanwhile, says Suncorp is already hard at work to bring the relief package to brokers’ clients. Because each SME is impacted differently, Mair believes relief packages should be tailored for clients.
“Ultimately the intention of the relief package is to help as many SMEs as possible remain viable through a period of challenge and uncertainty. We need to keep as many of these businesses in the ‘insurance system’ to ensure their insurance needs continue to be met when we get through this,” Mair said.
“[We] are already working with our broker partners to bring this relief package to life for their customers… We believe relief measures are best discussed between brokers and their customers experiencing hardship… We want to provide brokers with a range of relief options so that they can tailor an assistance package, including access to extended credit terms, for each of their eligible clients as appropriate.”
The centrepiece of the relief package is a premium deferral, meaning brokers can offer SME business insurance customers an option to defer their premium on policies for up to six months.
This measure, according to Mair, will “help business owners to remain focused on keeping their business running, with the confidence of having their existing insurance in place during this period.”
“Among other measures, we are also offering continuity of existing insurance, with no changes to premiums, terms or conditions for unoccupied business premises,” he said.
While the measure is still in its early stages, Clarke says QBE has already received positive feedback.
“The response we have had so far has been positive,” he said.
“… we’re having ongoing and constructive discussions as to how we might mutually implement [the measures] with our partners. While we have confirmed some initial ideas that we are happy to implement, there are already other alternative approaches being proposed.
“The intent is still the same – support for SME customers during their time of need so that they can be confident in achieving their ambitions when we are at the other side of COVID,” Clarke concluded.
But Mair says he is looking to the future for evidence as to whether the measures have been well received by the industry.
“Of course, it is very early days, and the proof will be what this means for SMEs over the next six months and beyond,” Mair said.
Importantly, he says the industry’s flexibility in this time offers an “alternative” to customers outright cancelling their insurance policies and being without any protection.
“Given these challenging times, it shows we are all looking to adapt and help our customers financially survive, while keeping their businesses protected in the meantime,” he added.
Both Clarke and Mair agree that the ACCC’s response to the COVID-19 pandemic, including the support measures provided to SMEs, has been strong. However, Mair believes it’s also important for brokers and insurers to work together to benefit SMEs.
“The ACCC have taken the first step in supporting our application on behalf of the industry. From here it’s important the ACCC, brokers and other insurers work together to make sure as many SMEs as possible are supported,” Mair said.
“We very much value the excellent working relationship we have with the ACCC and our other regulatory bodies and we welcome the ACCC’s support for this small business package, which has enabled industry to work together in the best interests of our customers,” Clarke added.
“This kind of cooperation between regulatory bodies, industries and individual businesses will be critical as the situation with COVID-19 continues to evolve.”
Australia’s successful economic recovery fundamentally relies on a strong and resilient SME sector, and Mair says all of the Suncorp Group is backing its business customers with “unprecedented relief to match the enormity of this incredible economic shock.”
Another measure introduced by the ACCC says eligible business customers should be refunded unused premiums for any insurance policy they need to cancel as a result of the pandemic and will not be charged administration or cancellation fees if they do.
“It’s important we show flexibility and support to get our broker partners and SME customers through this difficult time, and refunding unused premiums is the right thing to do,” Mair said.
“The hardship support available allows brokers to provide alternative options to SME customers other than cancelling their insurance policies, while maintaining a strong a trusted relationship.”
“Removing cancellation fees is an effort to assist any financial burden for the customers,” Clarke added.
“We do also recommend that customers ensure they work through any impacts of cancellations or reduced covers at this time as, despite the financial considerations, this is not a time to be reducing insurance cover.”
Despite these measures being introduced to aide SMEs, tough times still lie ahead. Both big and small companies will feel the financial impact of the COVID-19 pandemic, but Mair insists a big opportunity lies within this challenge.
“Our biggest challenge is also our biggest opportunity, to be there to help business owners to remain focused on keeping their business running, with the confidence of having their existing insurance in place during this period. We’ll continue to assess how this crisis will impact our broker partners and customers, and what further measures we can implement,” he said.
“Additionally, on the back of a couple of challenging years for the financial services industry, in terms of scrutiny of behaviour and performance, we all have an opportunity to play our role in demonstrating value and highlighting the important role brokers and insurers play to help businesses and the community in times of need.”
Similarly, Clarke agrees the pandemic will bring about widespread economic and humanitarian impacts that will continue for a long time. He says navigating this path will be challenging but that it’s important for the industry to continue working together.
“Navigating the path ahead will be challenging for insurers and brokers just as it will be for our customers,” he said. “That’s why it is so important that we continue to work together and support our customers so that we can get through this and emerge stronger on the other side.”