Most of the UK’s 4.9 million small and medium-sized businesses could be breaking the law by failing to ensure they have adequate insurance cover, it has been claimed.
Research by AXA Business Insurance revealed a majority of business owners were “probably unknowingly” trading without the cover they need and were potentially operating illegally.
It found 53% of businesses which require employer’s liability cover have failed to buy it, while more than half of those providing business advice services did not have specialist indemnity protection.
Four in 10 do not hold the appropriate policies required to adequately protect their car or van, and 43% of those meeting with the public, clients and suppliers do not have protection against accidents and damage.
The study also found the majority of SMEs do not have sufficient reserves to tide themselves over for more than a couple of months without regular income.
AXA said the results uncovered a “worrying lack” of protection among what is a fast-growing part of the UK economy.
“Insurance may feel like one of the little bits of admin that you ought to sort out at some point but not having it can have big consequences,” said managing director of the group’s business insurance division Darrell Samsom.
“Claims for liability can run into millions of pounds and not having cover in place is putting you, your business, your employers, clients and others at risk.
“We appreciate that generally, there is no intention on the part of these businesses to break the law or to put themselves and others at risk.
“Often it is a case of not knowing what’s needed, forgetting to do the admin or possibly worrying about the additional cost of insurance.”
Only 26% of those who run their businesses from home have spoken to their provider about whether they need to upgrade their cover, while just 19% of those who keep business tools and equipment at home have arranged insurance for them.
Small firms which had their applications for finance turned down by major banks have secured £42m in additional funding after appealing the decisions, according to the Independent Appeals Process.
The body, headed by independent external reviewer Russel Griggs, said it was “benefiting businesses” by supporting the claims made by around 9,000 firms and improving communication between companies and lenders.
Professor Griggs used the IAP’s third annual report to claim the group was “improving the conversation” between banks and SMEs, with the appeals process having a “major impact”.
The number of appeals received last year climbed to 3,518 last year, with 32% of claims resulting in the initial decision being overturned. Poor credit scoring was identified as one of factors hampering many would-be borrowers.