Insurtech UK statement on COVID-19
Clearly COVID-19 is having an impact on huge parts of the economy and certain areas of the insurance industry already. Those knock-on effects are being equally felt by some of the software Insurtechs. The Government’s various announcements show a huge commitment to the UK economy and Insurtech UK has already been contacted by officials for feedback on its approach, which provides some comfort.
Insurtech UK members have been raising their issues of particular concern over the past few weeks. Outlined below are the key areas which need addressing to support the Insurtech scene:
i. Ensure the CBILS scheme incorporates support for the start-up community. The traditional avenues for capital available to Insurtech UK members are now significantly reduced, resulting in many wishing to access the Government’s Coronavirus Business Interruption Loan Scheme. However, there are concerns that the viability criteria might disqualify investment backed early-stage businesses from receiving such a loan. Equally there is alarm around the variations in requirements from the different lenders creating a lottery for businesses when undertaking the application process. Finally, there is widespread apprehension for those start-ups that are deemed eligible, having to commit to excessive personal guarantees from some of the lenders in order to access these loans. This goes against the spirit of the scheme in these unprecedented times. An assessment of the viability criteria to be more accommodating to early-stage businesses, which is consistent across the various lenders would be incredibly helpful to those who are going to struggle to replace the lost funding opportunities in the months ahead.
ii. Creation of new fund aimed at supporting startups
The Government should also go further and create a new fund within the British Business Bank which specifically targets the needs of startups. We have seen other Governments across the world create liquidity packages designed for the startup community and we urge the Government to do the same. Many Insurtech UK members are worried about the funding options of their businesses in the short to medium term if they cannot access any relief. There is flexibility around the model of the fund; whether it be a convertible debt model or an agreement for future equity. We would welcome a discussion with Government about the details of such a scheme, but it is vital that the Government takes quick action to protect a huge success story in the UK economy in recent years, pioneering the innovations we will depend on in the future.
iii. Provide clarity on the COVID-19 job retention scheme. Insurtech UK is awaiting details of the Government’s COVID-19 job retention scheme, and particularly the extent to which employers can keep in touch with furloughed workers to maintain
their skill development, mental wellbeing and team cohesion. Whilst Insurtech UK fully supports the spirit of the proposals, considerations should be explored around a part-time option that enables more flexibility for both employees and employers (whilst creating less of a financial burden for Government) during this period where the traditional working structures are having to adapt.
iv. Insurers commit to their existing partnerships and stand by their distribution channels. Insurtechs are forming a huge component of the industry’s efforts to innovate and drive efficiencies. Existing arrangements should not be deemed dispensable and it would be counterproductive for the long-term future of insurance if the traditional insurers looked to cut delegated authority with its insurtechs now. Initial signs have been very positive and we call for this spirit to be maintained.
v. Increase Governmental support through existing startup incentives. Insurtech UK recognises the Government is under huge pressure to support every facet of the diverse UK economy. A certain level of patience is required to create and implement new relief schemes for its component parts. Therefore Insurtech UK is also open to the possibility of the Government extending existing schemes in order to provide immediate relief to insurtech businesses. This could include creating existing incentives such as increasing R&D tax credits, doubling SEIS/EIS limits or providing VAT rebates. We would welcome a discussion about how this could work with Government.
Advice for Businesses:
Information from BEIS and Public Health England on how to keep their employees safe during the crisis is available here: Keeping Employees Safe
The Government has created a website which provides details of the various support packages that have recently been launched for businesses and their employees which is available here: Business Support Website.
Details of some of the most significant measures are listed below:
- Coronavirus Business Interruption Loan Scheme information. The scheme will help SMEs access loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six years. The scheme will be operated through accredited lenders via the British Business Bank. British Business Bank Eligibility information
- Corporate Financing Facility information. The Bank of England will buy short-term debt from larger companies.
- Coronavirus Job Retention Scheme information. Any UK employer with a PAYE scheme will be able to access support to continue paying part of their employees’ salary (80% of wages) for those that would otherwise have been laid off during the crisis. The Government has confirmed that this scheme will remain open until the end of October.
- Coronavirus Future Fund information. The Government will match the funds raised from third party investment from £125,000 - £5 million through a convertible debt model. This scheme is being operated through the British Business Bank and will run from 20th May until September 2020, with scope for extension if there is sufficient demand.
- Innovate UK support package information. Up to £90 million is available in continuity grants to businesses who are existing Innovate UK award holders whose projects are at risk because of COVID-19.
- Bounce Back Loan Scheme information. This scheme allows SMEs to borrow between £2,000 - £50,000 from Government, and businesses are eligible if they are UK based, established before 1st March 2020 and impacted by COVID-19. The Government guarantees 100% of the loan and there will be no fees or interest for first 12 months. After 12 months the interest rate is 2.5% a year. The length of the loan is six years. Your business needs to comply with the Business in Difficulty criteria set out in EU State Aid rules to be eligible for this scheme.
- Working Safely during COVID-19 information. This guidance outlines Government recommendations for employers to make their workspaces compliant and safe for employees to return to work.
- Small Business Grant Funding information. Additional funding for Local Authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. A one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
- Time to Pay information – Opportunities available to businesses and self-employed people who are in financial distress with outstanding tax liabilities and maybe eligible for support.
- VAT deferral information – Supporting businesses to defer VAT payments for 3 months.
- Statutory Sick Pay Rebate information – Enabling SMEs to reclaim Statutory Sick Pay (SSP) paid for staff sickness absence due to coronavirus, covering up to 2 weeks’ SSP per eligible employee who has been off work due to coronavirus.
- Deferral of Self-Assessment information – Payments that should ordinarily due to be paid to HMRC by 31 July 2020 may now be deferred until January 202
- Support for Businesses outside of Government information.
- Wider business support information.
Advice for Employees:
- Statutory Sick Pay Information.
- Universal Credit Information.
- Employment and Support Allowance Information.
- Lay-offs and short time working Information.
- Problems in paying tax bills information.
Information from Insurtech UK's Partners:
Guidance from Browne Jacobson can be found here.
Guidance from Clifford Chance can be found here.
Guidance from Capital Law can be found here.
Guidance from PKF can be found here.
Guidance from Grant Thornton can be found here.
Guidance from Altus Consulting can be found here.