The Federation of Small Businesses (FSB) has published a report outlining its recommendations for insurers, as well as for the government and regulators, as firms face “widespread” woes when it comes to insurance coverage and premiums.
“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,” said FSB national chair Martin McTague.
“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.”
According to FSB’s Paying a premium? Reforming the insurance market to work for small firms report, 60% of small businesses have seen an increase in premiums in the last year. Of those whose insurance costs have risen, 52% pointed to a hike of 11% or steeper.
Meanwhile, as part of the recommendations, FSB is calling on the government to work together with insurers and the Financial Conduct Authority (FCA) to agree specific conditions for forms of government assistance that should not be taken into account when calculating claims for business interruption.
Other recommendations include explicitly requiring the FCA to consider market intervention in sectors where businesses are unable to secure coverage. FSB is also seeking that the watchdog carry out a study of professional indemnity insurance (PII) amid a hardening market.
Additionally, in FSB’s view, the government should convene discussion with sector-specific regulators and professional associations to ensure that PII requirements are not disadvantaging small companies. It also wants the government to use the Procurement Bill to remove barriers in accessing public procurement opportunities.
“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,” noted McTague.
“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.”
The chair pointed out that, taken as a whole, the recommendations will help make insurance easier and more cost-effective to access for small businesses.
