For freelancers, contractors and other self-employed workers, business insurance is usually an inescapable cost of doing business. Professional indemnity, public liability, IR35 cover and other policies all begin to add up. It’s natural to assume that they would look to find the cheapest possible cover, but new research suggests that in fact small business owners take a more savvy approach, valuing quality over price.
An independent survey of 500 SME business leaders commissioned by insurer Allianz found that the top priorities for SMEs when purchasing business insurance are:
- Breadth of cover (75%)
- Claims handling (58%)
- Reputation of the insurer (47%)
The poll also revealed that 80% of the SME senior decision makers said that they would be prepared to pay more for their insurance if they were advised that their cover was inadequate.
Of the factors considered when purchasing insurance, ‘cheapest price’ was ranked lower with just 31% of respondents claiming it was a priority.
David Martin, Allianz’s director of SME markets, said: “The results of the survey clearly show that when it comes to protecting their businesses, SMEs value breadth of cover over cost. Brokers can be confident that SME’s recognise the need for good advice to ensure their business risks are appropriately understood and managed.”
Steve White, Chief Executive of BIBA, supported the research findings and said: “It is promising that SMEs recognise the importance of cover over price, particularly at a time when loss adjusters have reported under-insurance of around 44%. We all want to ensure that claims are paid quickly and in full to help businesses recover and a simple way to ensure this, is to make sure that the correct levels of insurance are in place. It is important for businesses to review their cover regularly and insurance brokers have the expertise and knowledge to advise them on purchasing suitable cover.”
Often though contractors and other small businesses find it hard to get suitable cover, which meets the unique needs of a smaller, often specialised, firm. In February this led the Federation of Small Businesses (FSB) to set up its own broker, to help SMEs find the right cover. The FSB broker’s MD, Dave Perry, feels that the problem is partly down to communication: “Recent research shared by BIBA indicates that 86 per cent of SMEs want to see more bespoke insurance solutions and 71 per cent feel the Insurance Industry uses too much jargon,” he said.
FSB commercial and operations director, Dave Stallon, sees deeper problems in the cover that insurers offer to small businesses. “Increased and new kinds of threats facing small businesses – including flooding, cybercrime, terrorism and global supply chains – call for new types of insurance, yet many small businesses often struggle to get cover at all, or, if they do, are often either underinsured or don’t have the appropriate level of cover,” Mr Stallon explains. Allianz’s survey results suggest that as independent consultants and other SMEs focus on the quality over price, the tide may be turning.