Research from Legal & General has found that 73% of SMEs which took out a protection policy such as key person insurance did so after seeking advice.
78% SMEs that use an adviser had a business continuity plan in place, compared to 57% of other small businesses. 71% of SMEs who used a financial adviser had taken out protection to buy back shares if a director died, compared to 52% of those who didn’t have an adviser.
Legal & General surveyed over 800 small and medium-sized businesses to shine a light on the importance of business protection for SMEs, such as key person insurance, and the role advisers play in encouraging these businesses to take out protection.
The research also follows the insurer’s ‘Hero in the Middle’ campaign, which recognises advisers who go above and beyond to ensure their clients are protected.
20% of SMEs didn’t have a business protection policy because they either didn’t have enough information or because no one had advised them to.
Only 51% of SMEs were also prepared to spend more than £100 a month on Life or Critical Illness insurance, but this rose to more than 67% for businesses that were using a financial adviser.
Richard Kateley, head of intermediary development at Legal & General, said: “Intermediaries are already at the forefront of protecting families across the UK, but our research shows that they’re also championing the importance of protection for Britain’s small businesses.
“Almost three-quarters of SMEs that took out a business protection policy did so after receiving advice, whether that be from an accountant or financial adviser. SMEs that have engaged with a financial adviser are also much more likely to be prepared in the event of a key member of staff falling ill or dying.
“This could be through a business continuity plan, or an insurance policy such as share protection to help them retain control of their company if a key member of staff passed away.”
The report also showed that there were still opportunities for advisers to encourage more SMEs to take out cover. 20% of small and medium-sized companies that didn’t have any business protection hadn’t taken out a policy because they either didn’t have enough information about it or because no one had advised them to do so. 51% didn’t have a business protection policy because they ‘did not see the need for it’ or did not understand how it could help their company. However, 63% of SMEs said they were happy to be contacted by a financial adviser, presenting an opportunity for intermediaries to talk to these companies about the importance of business protection.
Kateley added: “Businesses often don’t think twice about insuring machines, vehicles, computers and offices, but they often forget about protecting their people – arguably their most important asset. As these figures show, small companies across Britain remain unaware of how a business protection policy could benefit them.
“For advisers, there is a clear opportunity to help change the status quo and ensure more SMEs – companies that are the backbone of Britain’s economy – are better prepared should they lose a critical member of staff. Nearly two-thirds of small businesses said they were happy to be contacted by a financial adviser.
“At Legal & General, we’re committed to working together with intermediaries to ensure they have the support they need to keep Britain’s small businesses protected.”