"Our recommendations, taken as a whole, will help to make insurance easier and more cost-effective for small businesses to access. "
- Martin McTague FSB National Chair
FSB's latest insurance report, ‘Paying a Premium?’ claims that 60% of small businesses have seen their insurance premiums rise in the last year.
Over half (52%) of those whose premium costs have risen insist that the rise is 11% or greater, while several individual businesses believe premium costs have risen beyond that – particularly following a claim.
The report also asserts that 30% don’t fully understand what their insurance covers and 16% who have renewed or switched their policy in the last year have had their cover restricted.
Consequently, FSB has proposed an urgent collaboration between the insurance industry and small business representative bodies in a bid to remedy these discrepancies.
FSB claims that the Pandemic brought many underlying problems with insurance into the limelight after numerous small businesses had to fight for their business interruption insurance to be honoured.
At the time, the FCA sought clarification from the High Court as part of a test case aimed at resolving the significant uncertainty around the validity of BI claims.
The FCA later advanced these arguments on behalf of policyholders to the Supreme Court where insurers’ claims were dismissed, granting thousands of policyholders reimbursement.
However, despite this Supreme Court action, FSB believes it is “critical for improvements to be made to avoid this in the future.” FSB has proposed that the Government should collaborate with the FCA and the insurance industry itself to “reduce the likelihood of businesses experiencing such uncertainty again.”
Furthermore, FSB reports that other forms of insurance, particularly professional indemnity insurance (PII) – which is very often a trading requirement for businesses in areas such as accounting or architecture – have seen their markets harden, restricting access to cover and the protection afforded to customers in the wake of COVID-19.
To combat these restrictions, FSB proposes that the FCA should launch a market study into PII. FSB believes this study is essential since small businesses that buy PII - because it is a requirement - are almost twice as likely to report overly expensive premiums than those that buy it for other reasons.
Martin McTague FSB National Chair has said:
“Cover for risks of all kinds – from fire to flood to less tangible dangers – is vital to small businesses’ continued ability to trade, but our report indicates that there are problems lurking under the surface that, if left unaddressed, could further hamper small firms’ ability to compete on an equal footing.
“Rising cover prices leave firms caught between a rock and a hard place, forced to pass on higher costs to customers, or to cut back on investment and expansion – or even to risk opting for a lower level of cover, which may leave them painfully exposed if the worst should happen.
“Our recommendations, taken as a whole, will help to make insurance easier and more cost-effective for small businesses to access, allowing them to be sure that, by paying for a premium, they are getting a premium product in return, one suited to their business’s particular needs.”
To view the full report, please follow the link here