Simon Halifax – Senior Marketing Consultant
The amount of businesses in the UK is at an all-time high – nearly 6 million at the last count. But our research suggests that many of these businesses don’t have enough business protection in place. Are they getting the right financial advice?
The number of private sector businesses in the UK at the start of 2019 was 5.9 million. Over 99% of these businesses (5.85 million) are small to medium sized enterprises, companies with less than 249 employees – SMEs for short. Since 2018, the amount of businesses in the UK has grown by 3.5%. And if we go back even further to 2000, there’s been an overall increase of over two thirds (69%). That’s another 2.4 million businesses in just under 20 years1.
If we look at this from a protection point of view – has there been an 69% increase in the amount of business protection sales since the start of the 20th century? Unfortunately, I can’t find that answer. However, according to the latest Swiss Re protection term watch report there was a total of 21,477 new business protection policies sold in 2018. This was an increase of 1.4% on the previous year2. This doesn’t feel like much of an increase, especially given the rise in the SME population.
Without the right protection, SMEs are in danger of going bust.
To better understand SMEs and their understanding of business protection – how important they think it is and where they get their financial advice from. We asked several SMEs to complete an online survey – we received 748 responses and our findings are quite worrying.
For example, 78% of SMEs have at least one business protection product. Yes, that’s a high percentage, but it does include protection products such as professional indemnity insurance, property and vehicle insurance. When we focused on business protection covers for staff and owners such as key person, shareholder or loan protection the figures dropped dramatically – to just 22%, or around 1 in 5 having at least one of these.
Why such a low uptake? Don’t they think it’s important? They do, well more do, as just under half of those who were aware of these types of insurance thought it was important to have key person protection (44%) and one third (33%) thought it was important to have shareholder or partnership protection.
There could be a perception that businesses treat their people like machines that never break down, but unfortunately, they do, and the impact can be devasting for a small business – much worse than say a computer breaking down, which is much easier to replace. For example, what would happen if a key employee who’s integral to the success of that business was to die or a shareholder was to suffer a critical illness and wanted to retire and sell their share of the business. Would the remaining shareholder(s) have the funds to buy them out? Business protection covers these types of events by providing funds to help that business cope at what would be a very troubling time.
Sources:
1. National Statistics – Business population estimates for the UK and the regions 2019 (October 2019)
2. Swiss Re Protect Association Term & Health Watch 2019 (July 2019)
