The results of a recent survey of over 1,500 business owners is cause for some concern. The Vero SME Insurance Index 2016 has found that many businesses are not necessarily covered for the risks that keep their owners awake at night. There also appears to be some common misconceptions about exactly what coverage businesses do have.
What keeps SME owners awake at night?
Vero’s latest survey, now in its fifth year, found the top concerns for SMEs are rising costs (47%) and the economic outlook and potential for a downturn (42%). A third are concerned about increased competitor activity. Obviously, these are risks you cannot insure against.
Of the risks that are insurable, however, the most common concerns for SMEs naturally relate to events that would adversely affect their ability to conduct business.
For example, 32% of SMEs are concerned about being unable to trade for an extended period. Equipment failure or breakdown is a concern for 31% of SMEs. Workplace accidents, cyber-attack and litigation also made the list of concerns. As did natural disasters, theft and employee negligence and fraud.
Most concerning business risks
Are SMEs covered for the risks that concern them most?
Alarmingly, the answer in many cases is no.
The SME Insurance Index includes a self-completion survey with responses based on SMEs’ own perceptions and understanding of the insurance cover they have. Based on those responses, it appears that many SMEs do not believe they are covered for the business risks that they are most concerned about.
Of those ranking ‘being unable to trade’ as one of their top concerns, 80% said they don’t have business interruption insurance. Businesses utilising Insurance Brokers are slightly more likely to believe that they’re covered for business interruption than those arranging their own insurance.
By industry, retail and accommodation/food businesses are slightly more likely to think they are covered.
It’s a similar case for those concerned about equipment breakdown with 80% responding that they don’t believe they are covered. Further, industries that are heavily equipment-dependent are not necessarily more likely to be covered for this risk.
One in 4 SMEs claim to be very concerned about cyber-attack. And for good reason too, with 11% of businesses saying that they have fallen victim to a cyber-attack within the last 12 months. As cyber insurance is a relatively new insurance option, it’s not surprising 91% of those concerned about cyber-attack don’t believe they’re currently covered.
Even those who have experienced a cyber-attack in the last year are unlikely to be covered, with less than one-third claiming to have cyber-insurance.
You can learn more about cyber-insurance in my August 2015 article Cybercrime on the rise: How to protect your business.
Common misconceptions about coverage
Another trend revealed in the survey is that of misconceptions about what businesses are actually covered for, with the report stating:
“Despite 39% of SMEs claiming to be knowledgeable about business insurance, the data shows a number of notable anomalies suggesting that many SMEs have significant knowledge gaps about business insurance.
“For example, over 20% of sole traders in NSW claim to have workers’ compensation cover, despite the fact that it is only available to businesses with one or more employees in NSW.”
Another misconception involves the claims process, with over 1 in 4 clients of Insurance Brokers not knowing that their broker can manage claims for them.
During in-depth interviews conducted for the survey, SMEs said that while they like the idea of a broker handling a claim for them, they still want to be kept updated and consulted on developments during the claim. Making a claim can be an emotional experience causing considerable stress, and brokers appear to be playing a significant role in reducing the stress clients often feel throughout the claim process. When claimants were asked to rate how stressful they found the claims experience, respondents with a broker were more likely to feel relaxed, the survey found.
Support from a local Westlawn Insurance Broker
At Westlawn Insurance Brokers, our experienced brokers can help protect your business with competitive business insurance from a wide selection of leading insurers. Of course, we also provide ongoing support for your business by reviewing your insurance needs annually to ensure your business remains properly covered.
We’re also there when you need us most … when you need to make a claim. We provide assistance with any claims and stand by you throughout the claims process.
To discuss how an Insurance Broker can help protect your business, contact Westlawn Insurance Brokers today:
- Call us on 1300 WESTLAWN (1300 937 852)
- Email us at firstname.lastname@example.org
21 March 2016
About the report
The Vero SME Insurance Index 2016 is based on research involving over 1,500 business owners and decision makers from around Australia. The research was independently* conducted in two stages: Research methodology Stage one: Quantitative survey A nationwide online survey of 1,526 business owners and insurance decision makers was conducted, covering a range of business types, locations and sizes. The survey was conducted during September 2015 and the data was weighted by state and organisational size to current ABS data.
Businesses were divided into three groups, following ABS standards: Micro Businesses which employ 1-4 individuals. Small Businesses which employ 5-19 individuals. Medium Businesses which employ 20-199 individuals. Stage two: In-depth qualitative interviews. A series of interviews was conducted with 12 SME respondents representing a mix of business sizes, types, attitudes to insurance, insurance purchasing channels and demographics. These sessions were held at respondents’ workplaces during November 2015.
*The research was conducted by BrandMatters www.brandmatters.com.au