Article by cirmagazine.com
New research from small business insurer Direct Line for Business reveals that only a third of SMEs currently have professional indemnity insurance. Not all SMEs will require PII cover but those that do out of the remaining 3.3 million of the UK’s 5.2 million SMEs could find themselves uninsured should their clients suffer a financial loss as a result of negligent or poor advice.
The analysis suggests that only 733,000 SMEs (14%) are considering taking out PI in the next 12 months.
Despite the number of SMEs taking out PI growing by 235,000 – or 14% – last year, without sole traders, there was a significant fall in the number of micro (-15%) and small (minus 6%) businesses taking out PII policies.
“The number of sole traders with PII has risen sharply over the past year, underlining the importance these entrepreneurs are placing on protecting themselves from the potential knock-on effect of a client suffering financial losses,” Gary Holmes, products manager at Direct Line for Business, explained. “That said, there are still a large number of businesses who are offering services or advice that don’t have the right cover in place, thus exposing their businesses to huge risks that could cripple their enterprises.”
When broken down by industry, Direct Line’s analysis revealed that SMEs in the legal services industry were most likely to have PI, with 88% of businesses taking out insurance. This is followed by financial services (59%) and scientific, technical and engineering research (52%). SMEs in transportation (12%) and retail and wholesale (11%) are the least likely to have PI cover.
Recent research revealed over 320,000 businesses had been affected by poor advice over the last 12 months, underlining the importance for SMEs having suitable insurance cover in place.