A new guide from the ABI aims to help the UK’s Small and Medium-sized Enterprises (SMEs) better understand their insurance needs and address gaps in coverage. The guide breaks down the different insurance products and requirements for SMEs, which represent 99% of UK businesses.
When things go wrong a lack of insurance, or inadequate insurance, can be catastrophic. The ABI’s new guide sets out simple steps for business owners to consider when taking out and renewing their policies. Alongside explainers on the products businesses are legally required to have or may need, and advice on how to understand coverage requirements, the guide is aimed at improving their resilience to unexpected events.
SME Insurance guide: what every business needs to know has been developed in response to findings from research conducted by Public First, and commissioned by the ABI, which highlights how large numbers of SMEs are either uninsured or underinsured.
Each business’ needs will be different, but Small Business, Big Risk: Tackling SME Underinsurance found that many SMEs have not taken out appropriate insurance for the risks they may face. For example, while 48% of respondents said their business had a physical premises, of those only 23% had business interruption insurance. Similarly, 57% have portable electronic equipment but only 31% have commercial contents insurance. And 57% of respondents said they had software or cloud services, but only 29% had cyber protection insurance.
The research also highlights that many businesses aren’t reviewing their policies regularly. Only half of respondents said they had reviewed the types of insurance they hold or their level of cover in the past 12 months. If protection is not keeping pace with changing needs, this exacerbates the underinsurance challenge.
Demonstrating that many SMEs are not aware of what insurance cover is available or why it might be relevant to their specific risks, the research highlights the importance of raising awareness and understanding of insurance options and the need to boost resilience. It makes several recommendations for industry, regulators and government to address the challenge, including:
- Insurers, intermediaries, business bodies and government should work together to raise awareness and understanding of risks facing SMEs and the benefits of insurance, by running a time-limited engagement campaign.
- Insurers should continue to review the design and presentation of products for SMEs with the aim of securing stronger customer understanding, better tailoring of offerings and higher take-up.
- Insurers, brokers and price comparison sites should continue to refine customer journeys to support clearer understanding of needs and appropriate cover choices.
- Insurers, brokers and price comparison sites should improve processes for reviewing and renewing insurance so that renewal on current terms is not the default.
- Brokers should further promote their offer to SMEs, focusing on high satisfaction and the benefits of personalisation.
- Insurers, business bodies and government should work together to make the strategic economic case for SME insurance.
Chris Bose, ABI Director of General Insurance Policy, said:
“SMEs are the backbone of our economy, and having the right insurance protection is essential to helping them stay resilient when the unexpected happens. From cyber incidents to supply chain shocks, the right cover can mean the difference between a temporary setback and a potentially devastating halt to operations.
“Our new guide, developed with Public First, is a positive step forward. By simplifying language, demystifying insurance products, and setting out clear stages of the insurance journey, it gives SMEs the clarity and confidence they need to make informed decisions to protect their business. Stronger understanding leads to stronger resilience, and this guide will help businesses get there.”
Andrew Harrop, Director at Public First and co-author of the report said:
“Public First’s research shows that millions of SMEs and sole-traders are going without insurance relevant to the risks their businesses face. Others are buying inadequate levels of cover which means that any future losses are not fully protected.
“Our report shows that SMEs trust the insurance sector but go uninsured or underinsured because of misunderstanding, low awareness and concerns about affordability. That’s why the ABI and Public First have worked together to develop clear guidance for SMEs on what insurance products are suited to their needs and the questions to consider when buying or renewing cover.”
Notes to editors
- Uninsured means having no protection against a risk a business may face. It could be without insurance entirely, or the policy may be too narrow in its coverage.
- Underinsured means being insured against a risk, but for less than the level of protection needed.
- Small Business, Big Risk: Tackling SME Underinsurance presents evidence from a survey of over 1,000 SME decision-makers, as well as qualitative findings from two focus groups (one of sole-traders, one of micro-employers) and two expert workshops (one with insurers, one with SME representatives).
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