Small businesses may be growing their revenue, but the vast majority – 75% – are not adequately protecting themselves and their assets.
Small businesses are an essential part of the US economy, with 56 million workers employed at firms with fewer than 50 employees, representing 45% of all private-sector jobs as of the first quarter of 2022, according to the US Bureau of Labor and Statistics.
However, the 2023 Hiscox Underinsurance in Small Business Report, which surveyed 1,000 small businesses last July, found widespread insurance illiteracy and a nationwide underinsurance crisis, leaving small businesses open to loss risks ranging from property damage to lawsuits.
Of the small businesses participating in the survey, 75% were underinsured, and over 70% did not understand what business insurance covers.
- 65% had general liability coverage
- 45% had property insurance
- 35% had worker’s compensation insurance
- 32% had professional liability insurance
- 47% have increased revenue since 2021
- 32% have had a decrease in revenue during the same period
Of those businesses that had coverage, 68% of those with coverage purchased it because they were concerned about the consequences of a potential claim. Only 20% noted they purchased insurance because a vendor or partner mandated it.
These stats point to an opportunity for local insurance agents and brokers to step in and become an invaluable resource for small business owners.
Of the small business owners with insurance, 70% still choose to purchase through an agent or broker, and most find them to be the most helpful source of information (56%). Only 29% of respondents reported choosing to purchase insurance online, while 42% preferred to purchase insurance in person, emphasizing the importance of local brick-and-mortar agents for small businesses.
And small business owners need that expertise. Of those surveyed, 71% do not understand what a business owner’s policy covers and 83% fail to describe a general liability policy’s coverage correctly. Of the US small businesses operating for ten years or more, 39% have never updated their general liability insurance.