IoD in plea to Kwarteng over rising business insurance costs | Business News

Britain’s bosses’ union has warned that soaring insurance costs are deterring business owners from tendering for public sector contracts, exacerbating the impact of the coronavirus crisis on SMEs.

Sky News has seen a letter from the Institute of Directors (IoD) to Kwasi Kwarteng, the new business secretary, in which it urges an overhaul of “the public sector’s approach to procurement and risk management”, amid suggestions some bodies are requiring disproportionate levels of insurance cover.

In the letter from Jonathan Geldart, the IoD director general, he cites research suggesting nearly half of company directors had seen a rise in the cost of professional indemnity insurance.

For directors’ and officers’ insurance, Mr Geldart said, the picture was similar.

The IoD chief said the impact of the changes was “profound” for smaller businesses, which could be “forced to stop submitting tenders for public sector work altogether”.

“This problem is in some cases being compounded by the procurement policies of public sector bodies, where we have heard instances of demands for multi-million-pound coverage even for very small contracts.

“Cost increases put yet more pressure on businesses and entrepreneurs at a time when, for many, cashflow remains fragile.”

Mr Geldart warned the COVID-19 crisis would mean that “increased risk pervades the economy”.

“However, we would urge the Government to start by considering the public sector’s approach to procurement and risk management.

“While it is crucial that risk is not simply transferred onto the public sector, it is important for decisions regarding insurance coverage requirements to be proportionate to the project at hand.”

Sky News