Over the last three years, more than two million budding entrepreneurs have taken the leap and started their own business, with official figures from Axa showing 3.5 million more will be looking to join them in the near future. However, it appears these new CEOs-in-waiting are all willing to take big risks with their investment, as the majority of them are operating underinsured.
According to a recent study, just four in ten of the new businesses started in the last three years had basic business insurance. Expanding to businesses in operation for four years sees the number of businesses with insurance increased to six in ten, but that still leaves a worrying number of start-ups without protection.
Whilst you could categorise many of the business insurance policies under “don’t buy at your own peril”, employers’ liability insurance, which covers injuries and illness, is a legal requirement. Non-compliance can see your business being slapped with penalties of &2,500 per day.
The most common reason businesses gave for not buying insurance was not the price, it was simply an under-appreciation of the risk presented to their business. Nearly three-quarters of those without cover gave the small size of their business as their reason for not buying insurance, whilst a further 25% hadn’t even considered a policy.
The types of claims being made have also evolved in recent years, with the previously wide spread “trade specific” claims such as industrial deafness or repetitive strain injury falling by 73% since 2013, businesses becoming better at spotting and reducing these types of risk. However, “non-trade specific” claims such as trips and slips, falling from step ladders or even being scalded by a hot drink have doubled since 2014.
Unlike Employer’s Liability, Professional Indemnity is not a legal requirement, but for recent start-ups like professional freelancers, it could mean the difference between security and financial ruin. Professional indemnity covers costs for compensation following alleged professional negligence, including breaches of intellectual property and data protection laws. It was discovered that new freelancers were the least insured, with only a quarter of those surveyed having professional indemnity cover. The figures for older freelancers were only marginally better, with the rate of those with indemnity insurance reaching 35%.