For some businesses, certain insurances are a legal requirement. For others, the insurance they choose will have a number of factors to take into consideration. Dave Howell assesses the current insurance landscape.
Whether you are launching a new business or have an established enterprise, protecting yourself from unforeseen events is vital. The range of insurance products that are now available is wide and diverse — covering general risks and specific insurances aimed at particular business sectors or industries.
Protecting your business’s assets is usually the focus when purchasing insurance products. Flooding and other natural disasters are becoming more common and businesses in vulnerable locations should have insurance in place to protect them from these potential incidents. Well-understood insurances including cover for vehicles are also a requirement by law.
Employers have a statutory responsibility to have employer’s liability insurance to protect their firms if anyone is injured or has an accident. The insurance is designed to cover any compensation claim that is subsequently made and the level of insurance must be a minimum of £5 million. The policy should also cover any contractual or contingent workers your business might employ. As enterprises embrace more flexible working practices, it is critical to have insurance in place to cover these groups of workers.
Customer-facing businesses should also have public liability insurance in place to protect themselves from possible claims made by the public. This is defined as anyone not directly employed by your business, in the event of an accident or an injury caused by an employee’s negligence. In addition, product liability insurance will cover any compensation claim from an injury caused by a product your business either manufacturers or supplies.
Other general insurances your business may need or want to take up include: legal expenses insurance, director’s and officer’s insurance, environmental liability insurance and professional indemnity insurance if your business supplies professional services such as legal or financial advice to clients.
As no two businesses are the same, it is important to closely consider the risks your particular business could face. Insurance products have evolved to the point where virtually any risk can be insured against.
Choose your cover
Small Business Essentials spoke with Katie Aston, Head of SME Insurance Services (SMEi), a broker which arranges business insurance for small to medium high street businesses including shops, hair and beauty salons, pubs, takeaways, restaurants and hotels.
Do new small business owners often ignore the insurances they must buy?
“We do get quite a few cases through where new small business owners have been trading for a number of months. However, they have been uninsured as they say they didn’t have the time to organise their cover.
“It’s also important that as a small business, they meet their legal obligations. AXA for instance, reports that 53% of businesses who have employees, do not have employer’s liability insurance. These businesses could be fined up to £2500 a day until this insurance is in place.”
How should new business owners assess which insurances they need?
“The potential risk to the small business of not having the appropriate cover for its needs is that it may be left exposed. We know small business owners are busy people, with limited free time. This is where a broker can help as we can do the searching for them, so they do not have to.”
What are their main business risks?
These fall into a number of general categories that include:
damage to their property or possessions
loss of stock due to fire, theft, flood, etc
liability claims by members of the public or employees
loss of income as a result of being unable to trade due to damage to property.
“Another potential problem is not keeping their insurance up to date with the changing needs of their business. Too often, a business will set up the cover at the start and simply renew it every year, without checking and updating it. In the time since they first took out their cover, they may have made changes to the business, including expansion, or an increase in more expensive stock, or employ an assistant to help them. It is changes like these that might leave their insurance out of sync with their business needs and could lead to a claim not being paid in full or in part if they are underinsured.”
What are the pros and cons of using an insurance broker?
“Brokers can help as they take the hassle out of searching for the right insurance, at a price that is right for them. Brokers typically have access to a range of insurance products from a number of insurers — including well-known brand names and specialist providers. This helps them to provide the small business with a choice.
“As the insurance market is competitive, there may be other providers who may be cheaper — for example buying an “off-the-shelf” insurance through price comparison websites or direct from an insurer. However, these companies often require a business owner to invest time in searching, understanding exactly what type of insurance they need, the amount of cover required, and also the details of the ‘small print’.
“In addition, buying an off-the-shelf insurance policy from an online price comparison site or direct insurer, the business will often be presented with a standard insurance product which may not fully meet their needs or have highly restrictive conditions or exclusions.
“Unlike most direct insurers or price comparison sites, what makes brokers different is they typically provide advice. By having a thorough conversation with the business, the broker will help them assess their risks and what cover they may need.”
Insurance is a fact of life for all businesses. With such a wide range of policies on offer, small business owners need to take time to understand their needs and then match these to the right policies.
Outside of statutory insurance needs, which elements of your business you want to protect should be carefully assessed. Insurance should not be a set up once and forget exercise. It’s vital to regularly review your needs and the cover your business currently has, as often, this no longer meets the needs of your enterprise as it stands today.
What cover does your business need?
Taking the time to assess the risks that your business faces will lead you to the right insurance products to mitigate your risks.
It is the law to have some types of insurances in place if your business has employees, or trades in certain highly regulated industries. Ensure your business has all the insurance it should have to avoid fines and prosecution.
Updating your policy
Insurance can be easy to purchase and set up and then forget about. Your business must regularly assess the insurances it has live to ensure they still meet whatever they are covering. You may later find your cover is no longer relevant to your business.
Shop around and take advice
Your first port of call will likely be insurance comparison websites. These can give a general view of cover and cost. However, using a broker who will spend some time understanding your business’s precise insurance needs, could save significant amounts of money.
SME Insurance Services is a trading name of Jelf Insurance Brokers Ltd, which is authorised and regulated by the Financial Conduct Authority (FCA). Not all products and services offered are regulated by the FCA. Registered in England and Wales number 0837227. Registered Office: Hillside Court, Bowling Hill, Chipping Sodbury, BS37 6JX.
Last reviewed 26 November 2018