How can brokers address insurance education gaps among SMBs?

One in five are worried about business interruption but lack insurance

How can brokers address insurance education gaps among SMBs?

SME

By Gia Snape

For small business owners (SMBs) in Canada juggling tight budgets, growing competition, and the ever-present drive to expand, business insurance can often fall by the wayside.

A new survey by TD Insurance has highlighted the huge gap in protection for these enterprises, which are considered the backbone of Canada’s economy. Around 40% of SMBs think they need insurance, while another 30% don’t think it’s worth having because they don’t have employees.

At the same time, small business owners are worried about:

  • Business interruption (19%)
  • Damage to property and contents (10%)
  • Employee safety (7%)

For Tang Trang (pictured), vice president, product and pricing, small business insurance at TD Insurance, the data reflects a broader knowledge gap that leaves many small businesses vulnerable to risks they may not fully appreciate.

“It’s tempting to skip insurance, especially with tight budgets during economic uncertainty, but the cost should be weighed against the benefit of protection when unexpected events arise,” Trang told Insurance Business.

“Owners must also ensure their policies evolve alongside their businesses. As inventory changes or customer bases expand, they need to confirm their coverage still meets their needs.”

Addressing SMBs’ misconceptions about business insurance

The survey, conducted by Maru Opinion on behalf of TD Insurance in August, polled 752 randomly selected Canadian adults who are owners or decision-makers of small businesses with revenues less than $5 million and less than 100 employees.

One positive note highlighted in the survey was that 60% have consulted with a licensed insurance advisor about their business.

Business interruption remains one of the most significant concerns for small business owners. Trang noted that some of this concern still stems from the effects of the COVID-19 pandemic when shutdowns wreaked havoc across industries. Yet, many owners remain unaware of these protections, and Trang sees this as a key area for education. He noted that SMB owners still hold many misconceptions about insurance.

“There were two examples of this in our survey,” Trang said. “First, many small business owners think they don’t need insurance if they don’t have employees.

“Even solopreneurs face risks, like business interruption, and if you operate from premises where customers visit, you’re exposed to liabilities – such as slip-and-fall incidents. Contractors might need commercial vehicle insurance if they handle deliveries. Even without employees, there are plenty of scenarios where insurance is necessary.

“Second, some owners assume their residential or personal insurance covers their business activities. That’s often not the case, especially for business interruption coverage.”

SMBs need to regularly review their policies

Trang raised another troubling trend in the survey: “About a third of businesses don’t review their policy,” he said, leaving them potentially unprepared for unexpected events.

Insurance brokers and advisors are critical for helping SMBs understand what their current policies cover and where gaps exist. Trang encouraged brokers to instigate regular policy reviews with SMB clients. Even among insureds, he said, there’s often a failure to adapt coverage to the evolving needs of the business.

“Many owners fail to reassess their policies, leaving gaps in coverage,” he said. “As they focus on their business, they also have to make sure they have the protection that actually responds to the change.”

This includes considering whether policies account for changes in inventory, customer bases, or operational structures. Insurance advisors also play a critical role in this process, particularly in building trust and fostering understanding.

For SMBs concerned about affordability, Trang suggested bundling options. Purchasing commercial property insurance, liability insurance, and commercial auto insurance together can often lead to discounted rates for clients.

“Every business is unique, and the right advisor can walk you through these nuanced discussions and find the right coverage for your situation,” he said.

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