Small business owners grappling with insurance knowledge gap – report

There is a significant gap between small business owners’ biggest stressors in 2023 and what they are actually prepared for when it comes to insurance knowledge and coverage, according to a new survey from NEXT Insurance.

The survey, which polled 500 small business owners across the US, found that although 96% of respondents did not achieve a “passing” grade in a general insurance knowledge test, only a third said they had sought professional help for their insurance needs.

However, 82% were taking some steps on their own to protect their business, such as reviewing their coverage or conducting a risk assessment, the survey found. Even so, 90% of small business owners said they lacked confidence that their business was adequately insured.

“Insurance has long been thought of as a complicated yet necessary part of running a business,” said Alon Shiran, vice president of product at NEXT Insurance. “Insurtechs like NEXT are changing that by offering digital-first self-service platforms that are easy to navigate and understand, making the process of obtaining insurance simple and seamless. Our priority at NEXT has always been to enable small businesses to thrive. Through our digital-first self-service platform and machine learning-driven solutions, we’re providing entrepreneurs with coverage tailored to their specific business needs.”

Among the survey’s key findings:

• Small business owners are sweating the small (and big) stuff: More than half (51%) of respondents listed making a professional mistake as a top potential risk that could negatively impact their business this year. Small business owners were largely aligned on their top concerns for 2023: 68% are most concerned about inflation, followed by reduced consumer spending, the possibility of recession, and supply chain issues
• Most small businesses are under-prepared and underinsured: While 90% of small businesses lacked confidence that they are adequately insured, 29% of respondents had no business insurance coverage. Fifty-one percent of those surveyed said their business was less than “very prepared” to face potential risks, but 18% of all respondents are not taking or do not plan to take any steps in the next six months to better protect their business
• Insurance rivals taxes as a small business knowledge gap: More than half (53%) of small business owners said their greatest barrier to obtaining insurance was knowing what policies and coverage they needed. Despite this, only a third will actually seek professional help for their insurance needs. When tested on general liability insurance knowledge, 96% of respondents did not receive a passing grade (70% or higher). None of the 500 survey respondents received a perfect score
• Insurance must be tailored to fit the business: Survey respondents included men and women, urban, suburban and rural dwellers, and entrepreneurs of all generations. Rural business owners were more concerned about inflation than suburban owners (71% versus 64%). Business owners over 45 were more concerned about cyberattacks and data breaches than those under 45 (41% versus 30%). Women were more likely than men to feel their knowledge of coverage and policy needs were a barrier to getting insurance (60% versus 50%). Women were also more likely not to have insurance (35% versus 25%)

Read next: NEXT Insurance taps first general counsel

“Small business owners today have to wear a number of hats, and often feel pressured to be experts in everything from taxes and insurance to finance and HR,” Shiran said. “This is an unrealistic expectation, and thankfully there are many resources designed to support small businesses with guidance, education and tools needed to tackle some of the most common challenges they face.

“Insurance can be a daunting part of running a business, especially because without proper coverage, businesses can endure significant financial losses that could make or break their bottom line. Our goal at NEXT is to eliminate that burden with a simplified digital purchasing experience, embedded offerings through partners, customizable policies, accessible resources, and deep expertise so that small business owners can focus on what matters most – running their business.”

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