A new survey* from Allianz has revealed a 10% rise in the number of small and medium-sized enterprises (SMEs) that don’t have business insurance. In 2021 40% of respondents said they didn’t have any cover as their business was too small, they worked from home, didn’t have customers on their premises, or they didn’t think they had much to insure. In 2022 this figure had increased to 44%. This is a worrying trend that is putting increasing numbers of SMEs at risk.
Why Are SMEs Reducing Business Insurance?
At the outbreak of the pandemic in early 2020, a number of small business owners looked to reduce their levels of business insurance cover. With a lockdown in force and with staff furloughed, many looked to temporarily change their insurance protection in line with their reduced levels of activity.
While this move made sense for many at the time, many business owners haven’t restored their cover levels to pre-pandemic levels. Despite the U.K.‘s GDP having recovered to pre-pandemic levels and with many SMEs enjoying a boom in business, business insurance levels have remained low or non-existent for a large number of small firms.
While business interruption was the dominant concern for SMEs during the pandemic, inflation has subsequently become their greatest worry. Research from iwoca found that 71% of small business owners are anxious about the impact of inflation on their operations this year. With the U.K.‘s inflation rate at 6.1% – the highest since 1982 – and with the Office for Budget Responsibility predicting it will reach 7.4%, entrepreneurs are becoming ever-more cost-conscious.
Cutting Business Insurance: A False Economy
While every business needs to watch its overheads, cuttingessentials such as business insurance protection can be a false economy. Some business owners feel that their businessis too small, that they don’t have enough to insure, or that it’s not relevant to them as they work from home. Not having cover, however, may leave them exposed, as the following case study illustrates.
Jenny works from home as a freelance designer. She deals with her clients either electronically or at their place of work and considers her business’s only assets to be her computer and herself.
One day she is presenting a set of concepts to a client at their offices, and one of their team trips on her laptop lead falls and breaks their wrist. As Jenny has no public liability insurance, she will have to pay any successful compensation claim.
Commenting on the rising number of businesses with in adequate protection, Mike Scanlan Cert. CII of Coversure Bedalde said:
“While this report is worrying, it shows why it isimportant for companies to seek some professional help and guidance when arranging and evaluating their insurance requirements. Underinsurance is a worrying problem. When entering discussions with prospective clients, we constantly find that business interruption insurance is something that has not been reviewed regularly. It is not just about the initial impact caused to the business because that can be overcome by making sure that you have property cover, but it’s the unseen effect of trying to recover your business financially over the short to medium-term.”
Underinsurance For SMEs
Even if a business has insurance provision, it may not be enough. This could lead to underinsurance issues in the event of a claim. Underinsurance has become a significant problem for commercial property owners, with research showing that 79%** of business premises are now underinsured. Underinsurance can cause substantial losses in the event of a claim, with business owners liable to find themselves receiving smaller pay-outs than they were expecting, thanks to their cover being too low. With inflationary pressures forcing up the value of stock and the cost of replacing goods, business owners need to ensure they have sufficient cover in place should the worst come to the worst.
What Can Business Insurance Cover?
Coversure is known for its business insurance service’s value and flexibility. Cover can be tailored to your business’s needs and protect you from risks, including:
Public Liability – if your business premises are open to the public or you undertake work in public spaces, you may need public liability insurance. With this cover in place, you’ll be protected financially should someone be injured while on your property or have their property damaged by your business’s actions.
Employers’ Liability – do you have any employees? Whether they’re part-time, contracted, or temporary, you are required by law to have employers’ liability insurance cover. Should any of your employees become ill or their property is damaged owing to their working conditions or your actions, employers’ liability cover will assist with the legal costs of the claims brought against you.
Products Liability Insurance – if you produce, sell, or even recommend products as part of your business dealings, product liability insurance is worth including in your cover. This will protect you against legal costs if you are sued if these products cause injury or damage to property.
Buildings insurance – if you own the building you operate from, you’ll want them covered by commercial buildings insurance. This will ensure your premises are protected from the worst-case scenarios such as flood, fire, or other disasters.
Professional Indemnity Insurance – if you give professional advice to customers, you should consider having professional indemnity insurance. Professional indemnity – P.I. as it’s also known – will help protect you should someone claim that your advice has cost them money.
Stock Cover – stock insurance covers the costs of replacing or repairing your stock if it’s damaged, lost, or stolen. Cover can also be provided to suit specific business needs. For example, if you have a restaurant, you can protect frozen foods should the freezer fail or increase cover for busy periods when stock levels are higher.
Business Interruption Insurance – what would happen if you were forced to close your business due to fire, flood, or other problems? Could you cope with no money coming in? Business interruption insurance can provide you with an income while your business returns to normal.
Cyber Insurance – the number of cyber-attacks on small businesses has soared. A recent survey found that cyber-attacks hit 51% of U.K. SMEs in 2021, a rise of 62% in 2020. Cyber insurance can protect you from the costs associated with ransomware attacks, data losses, and reputational damage.
Like Some Small Business Insurance Help?
If you’d like some help protecting your business, please contact your local Coversure office. They’ll be happy to provide you with a free, no-obligation assessment of your business’s needs.