More SMEs consider themselves 'too small' for insurance

They tend to be overconfident in recovery abilities and underinsured, survey reveals

More SMEs consider themselves 'too small' for insurance


By Mary Or

A growing proportion of SMEs do not have any insurance, a survey commissioned by Allianz Commercial has revealed. Of those covered, a majority still fail to review their cover needs when circumstances change.

The main reasons listed for not insuring their business were: the business is too small (47%), they work from home (42%), no customers come to the premises (34%), and there is not much to insure, e.g. no premises or vehicles (33%).

The UK only requires businesses with staff to have employers’ liability insurance and those with vehicles to have motor insurance. But SMEs may still find it hard to recover from a loss without an insurance payout, Allianz noted.

The survey also showed that many SMEs have modified the way they operate over the past 12 months. Nineteen per cent have increased the number of products or services they offer, 16% have changed the nature of their products or services, and another 16% have gone back to the office or shop.

Despite these numbers, only 41% altered their insurance policy to reflect the changes in their circumstances; a majority (52%) did not.

This contrasts significantly with lockdown trends last year, when 20% of SMEs started to work from home, 17% reduced products and services, and 15% reduced staff. At the time, 48% changed their insurance policy to reflect these new circumstances. This year, only 41% did.

“SMEs were quick to reduce their coverage during lockdown but they didn’t review it upwards when their activities picked up again,” said Helen Bryant, Allianz Commercial director of digital trading. “With payroll, stock, and profit coming back to pre-pandemic levels, they risk being underinsured if they don’t make the necessary adjustments – which might be tempting in the current economic climate. However, that would be a bad calculation in the longer term. If their level of cover doesn’t match their activity levels and they need to claim, the compensation they’ll receive may leave them out of pocket.”

Soaring prices were top of mind for SMEs. While business interruption was the biggest concern in 2021 (cited by 26%), only 17% of respondents viewed it as a business threat this year, falling behind inflation (33%), cash flow (29%), and competition (27%).

SMEs also tended to be over-optimistic about how long it would take them to recover from an unexpected event. Sixty-nine per cent believed that if their commercial property were destroyed by a fire, their business would be back up at its current level within a year.

Allianz said that a more realistic estimate was two years to get back to pre-loss levels, taking into account the work involved, such as cleaning and repairing the site, replacing equipment, getting planning permissions, and retraining staff.

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