A survey commissioned by digital insurance broker get indemnity polled 650 SME’s and found that 68% had not sought alternative insurance quotes in the past three years. A further 32% had not sought alternative insurance quotes in the past five years.
Small business with less than 50 employees were the worst offenders with 76% having not sought alternative insurance quotes in the past three years and 42% in the past five years.
The main reasons identified why SME’s were not engaging with the insurance buying process were identified as: 1) we have no reason to change; 2) we trust our insurance is adequate; and 3) our policies are automatically renewed online.
Simon Taylor (Managing Director) at get indemnity said: “the study wasn’t necessarily surprising when we consider SME’s engagement. However, when we combine the results with average reductions in premiums over the past five years, this means these SME’s could be missing out on cost savings between 25% and 45%.”
He continued: “During these unpredictable times, a lot of companies are going to be going through major transitions in terms of staff, overheads, risks and requirements. People are driving less, going to be working from home more and there are different risks and liabilities to be aware of.”
This survey has further supported the FCA’s Thematic Review that revealed 40% of SMEs could be underinsured, especially during times of COVID-19. The implications, however, are far more reaching when we consider underinsurance with respect of the amount and types of cover purchased.
68% of respondents did not purchase any cover for cybercrime and 38% did not purchase management liability insurance. Again, small business with less than 50 employees were the worst offenders with 82% without cover for cybercrime and 60% without management liability insurance.
Taylor explains: “We also found that businesses that grew faster in size, measured by employee numbers and turnover were more susceptible to underinsurance. When we completed a closer review of their insurance, the limits purchased and amounts covered hadn’t changed, but their potential maximum loss had increased.”
Certainly for those that have vehicle insurance or insurance for fleets, the potential quotes might be significantly less if customers are doing less mileage.
SME’s should also consider claims inflation and recent changes in the law with respect to discount rates for personal injury compensation. If the worst should happen, you want to make sure that adequate protection is available under your public liability insurance and employers liability insurance that won’t threaten the future of the business.