The latest findings from AXA show that many SME’s are happy to operate without business insurance.
In the last 3 years alone, more than 2 million people have launched a new business in the U.K., and those numbers are set to rise with around 3.5 million people saying they plan to go self-employed at some point.
However, in the most recent study conducted by AXA in August 2017, findings show that only 4 in 10 small businesses in the U.K have taken out insurance.
Furthermore, most of the start-ups founded in the last three years did not take out any type of business insurance, with just 4 in 10 taking out a policy.
By the time these businesses are in their 4th year, the number of policyholders grows slightly to 6 in 10 – but still leaves a significant amount of businesses unprotected.
Many businesses are even operating illegally by not taking out the compulsory employers’ liability insurance.
Any business in the U.K that employs staff is legally required to have an employers’ liability policy. Businesses that don’t take out this cover could face significant penalties – not to mention the legal fees and compensation costs if an employee makes a claim against them.
Penalties can reach as high as £2,500 for every day that a business operates without employers’ liability insurance, yet only 41% of small businesses with staff have the legally required employers’ liability, putting them in serious financial risk.
While some business owners are unaware of the insurance available, others do not consider it necessary, and some are simply avoiding the additional cost.
Start-ups, understandably, have to be notoriously tight with money in their early days. However, quite surprisingly, cost wasn’t the main reason for businesses not taking out insurance.
72% said they consider their business ‘too small’ to need cover, and 25% admitted they didn’t consider it at all. For those with insurance, only 3% forgot to renew.
“The key finding of this survey is that people are operating businesses without insurance because they think they are ‘too small’ or ‘too young’ for risk. We see no evidence in our claims figures that this is the case: we regularly settle injury claims on behalf of microbusinesses that top the million pound mark. That isn’t unusual these days at all“. – says Gareth Howell, managing director at AXA Direct
The research also shows that it’s not just ‘trade’ style industries such as construction and tradespeople that are making claims. ‘Non-trade’ businesses such as professionals and retailers have more than doubled since 2014.
Additionally, the U.K freelance economy has grown by 25% since 2009 and generates an estimated £109 billion per year, according to IPSE. There are around 2 million freelance workers in the U.K working across a variety of industries. However, only 1 in 4 takes out professional indemnity insurance cover during the first 3 years of operation.
For older professional service businesses, only 35% hold a professional indemnity insurance policy.
Businesses without the correct insurance run the risk of serious implications. Whether it be compensation costs, legal fees, damage, theft, or replacement costs – an insurance claim can be extortionate, leaving many businesses in a detrimental financial situation.
Examples of an insurance claim could be a customer slipping on wet floor, an employee falling from a step ladder, or a client claiming negligence. Whatever the claim may be, taking out the right business insurance could be considered a wise investment for start-ups that want to succeed.
Do you have insurance for your business? In the event of a claim, the right protection can take care of everything.