Rules and regulations have led to dramatically increased risks for the UK’s 4.5 million small businesses. That was the feedback from 62 per cent of SME owners, according to research by Coverzones, which polled the views of 504 small business owners. The business insurance price comparison site’s research has shown that legislative moves from the government are seen as causing more harm than good.
80 per cent of SMEs are facing greater insurance requirements, due to ever increasing litigation and red tape. However, more than a third (38 per cent) of SMEs have cut their level of insurance cover as a result of the current economic conditions, leaving themselves in a potentially vulnerable position. The Coverzones 2009 SME Risk Management Report shows one in seven (13 per cent) of SMEs lack adequate insurance cover for their business, despite this placing them in a high risk situation both legally and in terms of potential liability, and they could be facing fines of over £2,500 a day.
SMEs are cutting back on essential cover
The research revealed that many small firms may be putting themselves at greater risk, with only 26 per cent covered for every eventuality. A further quarter (26 per cent) claim to only have cover only for what is legally required.
Simon Ball, CEO Coverzones, said: “The reality is that commercial insurance always comes down to a traditional risk versus cost argument, but the financial turbulence of the economy has meant that for many businesses cutting cost has become more of a priority. Unfortunately, litigation against businesses is expected to rise due to the recession so, now more than ever, it is essential that they realise the importance of maintaining adequate cover.”
“With the current economic pressures some business owners have been ‘trimming down’ their cover to make savings. However, litigation against businesses will almost certainly increase as a result of the recession, fuelled by the withdrawal of trade credit insurance and staff redundancies. If misfortune were to strike, many businesses could be at risk. In fact, some small business owners could be risking their own homes by operating without insurance if they have made personal guarantees against their business.”
Small firms are hindered by lack of understanding
What the research showed most clearly, however, was that small businesses feel that they do not have the time to conduct proper research into the business insurance market.
Out of the 59 per cent of SMEs who think they are not getting value for money on their insurance, 91 per cent claim this is because they are unable to devote the time needed to compare policies and find better deals.
“The fact is that many SMEs understand the role of business insurance in managing the risks facing their businesses,” commented Ball. “The problem comes when they are unable to find and buy the corresponding cover.
The UK commercial insurance industry fails SMEs While UK consumers benefit from a plethora of comparison sites such as confused.com or Moneysupermarket.com for their personal insurance needs, business insurance is still relatively inaccessible, and companies tend to have to rely on brokers.
A lack of transparency means that small businesses cannot be sure they are being offered the right cover at the best price, and the Coverzones research showed that 77 per cent of SMEs would appreciate a similar online comparison service for their business insurance. This is even more so the case among time-poor owners of SMEs employing 2-3 people (87.5 per cent) and those employing 11-20 people (81 per cent).
“Many business owners are not sure they are getting the best deal through their brokers, and the reality is that the cost of servicing a small business can be uneconomic for the broker. A service allowing SME’s to compare the business insurance market for themselves has been long overdue” Ball concluded.
Top three tips for SMEs
1. It is essential to insure your business particularly in the current economic climate. Saving money by not having insurance is a false economy.
2. With very few exceptions, if you have employees you must have Employers Liability insurance by law. The HSE can fine you up to £2500 each and every day you are without cover.
3. Go online to check the value of your current policies but don’t cut cover.
To view the 2009 SME Risk Management Report in full, please see http://www.coverzones.com/