A new insurance survey’s findings showed that 75% of small businesses are inadequately insured, and a considerable 70% lack a clear understanding of the scope of their business insurance.

Specialist insurer Hiscox conducted this survey that brought to light critical gaps in insurance coverage and understanding within the small business sector in the US. The survey involved interviewing 1,000 small business owners in the US.

Other key revelations

The survey emphasized the invaluable role of local insurance agents and brokers for small business owners. Despite the rise of online platforms, a significant 70% of small business owners with insurance still prefer purchasing through an agent or broker. Moreover, 56% found them to be the most helpful source of information.

The survey also highlighted a comeback for physical businesses, with 42% of respondents opting to purchase insurance in person, countering the global shift to online purchases seen during the pandemic. In comparison, 29% chose online platforms.

Another revelation was the widespread misunderstanding among small business owners regarding fundamental insurance policies. A notable 71% had no understanding of what a business owner’s policy covers, and 83% could not accurately describe a general liability policy’s coverage.

The survey also raised a red flag with a significant portion of small businesses lacking essential insurance coverage. More than three in 10 did not possess general liability insurance, a fundamental policy. Almost four in 10 that had been operating for 10 years or more had also never updated their general liability insurance.

Broker advice for small business clients

In light of these findings, Hiscox outlined critical recommendations for brokers handling business-owning clients who are seeking comprehensive insurance coverage:

• Prior to purchasing or renewing insurance, it is essential to research industry-specific needs. Online resources and consultations with experts can provide valuable insights into the necessary insurance coverage tailored to the business’s unique requirements.
• Complete and accurate disclosure of information to insurance agents is crucial. Any omission or misrepresentation could lead to policy invalidation, claim denial, and potential legal repercussions. Transparency ensures precise protection.
• Businesses should review and update their insurance at least every two years or if there has been a substantial change of more than 20% in the business. As a business evolves, offering new services or expanding, insurance coverage should align with these changes to ensure comprehensive protection. Keeping insurance agents informed of significant developments is vital.

In recent news for the specialist insurer, Hiscox also announced the sale of its business operations in Singapore and Thailand.

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