FSB report identifies insurance failings

  • 25 Jul 2022

Small businesses are facing rising insurance premiums and reduced coverage, a new report by FSB warns.

The Paying a premium? Reforming the insurance market to work for small firms study finds that three in five (60 per cent) small firms have seen premiums increase in the past 12 months.

Over half (52 per cent) of those whose premium costs have risen say that the rise is 11 per cent or greater, while some individual businesses have seen cost rises far in excess of that, particularly following a claim.

More than one in 10 (16 per cent) also say their policy has been restricted in the past year when it came to renewal or switching provider.

The situation is causing confusion, with 30 per cent of small business owners admitting they find it hard to understand just what their insurance covers.

The report includes numerous recommendations including urging the Government to work together with insurers and the Financial Conduct Authority (FCA) to agree specific conditions for forms of Government support that should not be taken into account when calculating business interruption insurance claims.

It also calls for the FCA to be explicitly required to consider intervening in a market if it becomes clear that there is a segment or sector of businesses that are unable to obtain insurance



FSB National Chair Martin McTague 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 which, 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.

“Long, complex contracts present difficulties to smaller businesses without a whole department dedicated to deciphering legalese, and runs the risk of small business customers believing they have purchased adequate policies, when in fact they have not.

“Meanwhile, procurement processes which mandate unnecessarily high levels of insurance for relatively small contracts put them out of the reach of small businesses, once again leaving them on an uneven playing field.

“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.”

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