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230,000 small businesses without insurance

24th September 2013 Print

One in 20 small business owners have no insurance cover in place - equivalent to 230,000 businesses across the UK - leaving them vulnerable to liability claims, hefty fines and prosecution, according to research by leading insurer LV=.
Employers' Liability
By law, all businesses employing staff must have employers' liability (EL) insurance as a minimum otherwise they can be fined up to £2,500 a day by the Health and Safety Executive (HSE). Despite this, the research found that 350,000 small businesses who employ staff have no cover in place.
As well as being vulnerable to fines from the HSE, business owners could find themselves heavily out of pocket should one of their staff make a claim against them. According to LV= claims data, there has been an increase in the frequency of employer liability claims as more employees brings claims against their employers, which, in part, can be attributed to the UK's growing compensation culture combined with the tough economic climate.
Public Liability
Another area giving cause for concern is public liability cover. Slips and trips can result in expensive compensation claims for business owners who are liable for any harm caused to a member of the public while on their premises. Analysis of LV= data shows that after claims for theft and damage caused by leaks, storms or accidental damage, public liability cases now make up the next largest proportion of claims. However, according to the research, over one in 20 (6%) small businesses have no public liability insurance in place.
Business Interruption

An unforeseen event, such as a fire or flood, can stop trading for days or even weeks while repairs are undertaken and stock replaced. Depending of the type of business, this can spell financial ruin for companies that are unable to continue trading at alternative premises. According to claims data, the average cost of ‘business interruption' claims increased by 9% in 2012, yet the research reveals that just 60% of small businesses have this insurance. One in six (12%) office-based businesses and a similar number (10%) of residential property landlords have no cover in place; and in the hospitality sector one in twenty (5%) pub landlords are without this cover.
Mike Crane, LV= Broker Commercial Lines Director, said: "This research shows that thousands of small businesses are leaving themselves vulnerable to financial ruin by not taking out appropriate insurance cover. Those businesses employing staff are particularly vulnerable, risking daily fines of £2,500.
"In today's culture where compensation claims are on the rise, SMEs could find themselves thousands of pounds out of pocket if they do not have adequate protection. As we've seen in recent times, with riots, freezing winters and floods to commercial premises, there are many very real risks to SMEs which could prevent them from trading. Being insured for business interruption can therefore be the make or break for a small business."