As WFH became the default setting during the pandemic, the question of insurance probably never hit the radar of many home biz or side hustle entrepreneurs. But it’s often a legal requirement, not just a smart move to cover bills if you fall ill. Here’s some research on the topic. What can the industry do to make micro payment biz cover flexible, and affordable, when margins are tight on a 10-25K turnover?
Over 160,000 micro businesses in the UK with between one and nine employees, will not have employer’s liability (EL) insurance by the end of the year, according to new research from Smart Money People. This represents a combination of businesses that do not currently have EL and will not be taking it out, and those that currently have the insurance but will be stopping it during 2023.
EL insurance is a legal requirement for all businesses that employ staff. Without it, businesses risk fines from the Health & Safety Executive (HSE) of up to £2,500 for each day they are uninsured, and potential prosecution in the event of an incident.
Micro businesses were the most vulnerable to being uninsured for EL. Most sole traders with just one employee do not need EL insurance and the research showed larger employers with between 10-250 employees were more aware of their obligations. Many businesses with between 1-9 employers are likely to either not be aware of their responsibilities when they employ staff, or be throwing caution to the wind as they seek cost savings.
ILLNESS, INJURY, THEFT & MORE RISKS
The UK’s dedicated financial services review site highlights that just one day of being uninsured could cost a business significantly more than an EL insurance policy for an entire year. And, should the worst occur and an employee suffers an injury or illness as a result of their work, the employer would also be liable for hefty legal costs and compensation themselves.
Smart Money People’s CEO, Jacqueline Dewey said: “Senior decision-makers wear so many different hats and buying insurance at this level is often a distraction from running the business itself. Therefore, we believe that many small businesses may simply be overlooking the need to add EL to their basket of insurances as they grow.”
However, Smart Money People suspects that there is also a second group of businesses who have previously held EL and who now believe it is surplus to their requirements. There are some circumstances in which they may be correct but in most cases, it believes this to be a response to inflationary pressures.
EMPLOYER AND PUBLIC LIABILITY
Jacqueline Dewey said: “As everything from salaries, to raw materials and energy bills continue to spiral, it is completely understandable that some small businesses are trying to rein in their spending. However, they need to know that employers’ liability insurance is, in most cases, a non-negotiable expense.
“Insurers and brokers could use this as an opportunity to remind small business prospects about why they need to have this insurance and what protection it offers them. And the more this is tailored to the risks associated with specific industries or sectors the more these businesses are likely to listen.”
Insurers would also be pragmatic to warn small businesses that during times of economic hardship and driven by the aggressive tactics of claims management companies, employees may be more likely to sue their employer if they believe it will lead to a financial gain.
Jacqueline Dewey concluded: “Insurers know they will always face a challenge when it comes to micro and small businesses. Employers’ liability is perhaps an area where more education is required to help decision-makers at these enterprises really understand the product and more importantly, the risks associated from being without it.”