While Brexit had bred uncertainty around supply chains, labour and regulations, COVID-19 has had a more sudden impact on operations, according to Towergate Insurance. Businesses have been forced to adapt and reduce expenses – even if only in the short-term – leading to large-scale underinsurance.

According to Towergate, the most obvious knock-on effect of the COVID-19 pandemic is the loss of income to businesses. Many were forced to close, downsize, or cut costs during lockdown. And, when it comes to cutting costs, insurance budgets are often the first to go, it has suggested.

In addition to this, the broker noted, uncertainty and insecurity around operations makes it challenging to assess the amount of insurance that is needed.

An example of this, it said, is the level of stock required, potential stockpiling and if contents are adequately insured. However, uncertainty is especially pertinent for covers such as liability and business interruption costs, where limits are based around financial data, including turnover, profit, and payroll.

“The effects of covid-19 have had a huge impact on how businesses have operated during various levels of lockdown. In order to simply survive, many have adapted their business models, but often without considering its insurance implications,” said Mark Brannon, (pic) commercial director of Towergate Insurance.

“Examples are sit-down restaurants that moved to home deliveries and ‘brick and mortar’ retail stores that moved to online channels.”

While resourceful, these shifts will have an effect on risk and insurance requirements, he added: “For instance, where restaurant staff are delivering food, are their vehicles insured for that purpose? And where a shop goes global by being online, do they have sufficient liability cover if something goes wrong with one of its products overseas? The latter is especially pertinent given the new Brexit rules, regulations, and red tape regarding trade with the EU.”

Brannon suggested that the ‘Catch-22’ of both Brexit and the covid-19 pandemic is that decreased profits, increased costs and more uncertainty have led to businesses either cutting their insurance budgets or adapting to a point where they’re not adequately covered:

“And, in a time of such crisis, insurance is more important than ever. Taking out less than is needed can have severe long-term consequences that can jeopardise the future of the organisation, its employees, and the public at large if liability claims can’t be settled. Despite this, underinsurance is still incredibly common (whether in times of crisis or not).”

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