There are some 5.2 million small businesses in the UK according to the Federation of Small Businesses, accounting for 99.3% of all private sector businesses and a combined turnover of more than £3,500 billion.
Given these statistics, there’s a strong chance that many of you have clients who run their own small business. As a result, you’ll have an in-depth understanding of their financial position and a sense of their approach to doing business.
You’d probably expect them to be well grounded and sensible when it comes to running their business – after all, it’s their income generator. It may then come as a surprise to find out that around one in six small business owners and managers in the UK do not have any insurance.
Some recent research by one leading UK insurer found that many firms – and particularly those in the IT/media and marketing/communications sectors – are exposing themselves through either under-insurance or a complete lack of cover.
The same research found that the most common insurance claims made by the insurer’s SME customers included negligence, breach of duty of care and infringement of intellectual property rights. However as many as one in five of the SMEs surveyed did not know whether they had insurance cover for these risks.
Given these findings there is clearly a serious lack of awareness of the cover they may or may not have. The more serious implication of the research is that some may even be potentially breaking the law – they may not have Employers’ Liability cover in place for example, a legal requirement if they employ full or part-time staff.
I appreciate that attitudes to risk vary enormously amongst SMEs as well as insurance needs depending on the scale of the business itself. A small PR firm consisting of one person working from their home will have a very different attitude and requirements compared to the owner of a small manufacturing business employing a handful of people working out of a factory premises with plant equipment.
Not having the right commercial insurance in place is just as serious – potentially more so – as not having the right household cover. In my view this research highlights the fact that many SME owners simply aren’t getting the service and guidance they need from commercial insurance brokers.
Perhaps it comes down to trust – and this is where the opportunity lies for mortgage intermediaries. These clients trusted you to arrange their mortgage and possibly to help them with their personal insurances. It stands to reason that they may well then have greater trust in you to help them when it comes to their commercial insurance needs.
If they are operating their business from their home and have the odd client coming to visit them, even occasionally, they will need public liability insurance. If they are providing professional advice then, just like you, they should really have professional indemnity insurance in place and indeed some professional bodies demand it. If they have a small manufacturing business then they’ll need cover for their premises and plant as well as their staff.
Of course, commercial insurance isn’t your natural area of expertise and you don’t want to take your eye off your core business – but that doesn’t mean you can’t offer to help your SME clients get access to competitive commercial insurance solutions. Some general insurance providers such as ourselves offer a referral service for commercial insurance just as we do for personal insurance lines such as household. You will still receive commission, maintain ownership of your client and, more importantly, retain their trust.
So don’t ignore the additional possibilities that your SME clients present. It could not only deliver a healthy new income stream for your business but also strengthen the relationship which can only be a good thing.
Kevin Paterson is managing director of Source Insurance