• Little oversights with big consequences - SMEs breaking the law as they fail to protect themselves and their livelihoods

    June 16th 2014. Posted in SME Insurance

    As the number of SMEs continues to rise, statistics from AXA Business Insurance suggest that the majority of the 4.9 million SMEs in the UK are, probably unknowingly, operating without the insurance cover they need and over half a million are potentially breaking the law in the process.

    • over half (53 per cent) of those requiring Employers’ Liability cover by law have failed to buy it
    • forty three per cent of those meeting with the public/clients/suppliers neglect to protect themselves against any accidents/damage they may be responsible for
    • more than fifty per cent (52 per cent) of those paid by clients for business advice fail to buy professional indemnity cover
    • four in ten don’t buy the insurance they need for using their car or van for their business
    • the majority of SMEs do not have enough savings to tide them over for more than a couple of months without working. Yet over three quarters of these have no protection for personal accident

    The research, carried out by AXA among the UK’s SMEs shows a worrying lack of protection among what is a fast growing and important part of the UK economy. Darrell Sansom, managing director of AXA Business Insurance says: “Insurance may feel like one of the little bits of admin that you ought to sort out at some point but not having it can have big consequences. Claims for liability can run into millions of pounds and not having cover in place is putting you, your business, your employers, clients and others at risk.”

    Employers’ liability is required by law for all businesses who employ staff whether they are part time, full time, permanent or contract. AXA asked all those with relevant employees if they had cover in place and over half were found to be lacking. Furthermore, of those that did have the cover in place, nearly a quarter (23 per cent) failed to display a certificate – an offence that can be punishable with a £1,000 fine.

    Motor insurance is also a legal requirement. Many business owners use their own vehicle for their business but only 59 per cent of those have bought either a specific commercial policy or added the required business cover to their regular motor insurance policy. This is required even if the vehicle is only used occasionally in relation to the business.

    Other statistics from the study showed:

    • Only 26 per cent of those who run their business from home have spoken to their home insurer about cover for their business
    • Just 22 per cent have arranged any cover for taking their business equipment (laptop/phone etc) away from their home yet over two thirds have a laptop and a mobile/smart phone
    • And only 19 per cent of those who keep their business tools at home have arranged cover for them

    Darrell Sansom concludes: “We appreciate that generally, there is no intention on the part of these businesses to break the law or to put themselves and others at risk. Often it is a case of not knowing what’s needed, forgetting to do the admin or possibly worrying about the additional cost of insurance. But a little attention to detail could really mean a lot if you have to make a claim. The average cost of a liability or professional indemnity policy is about £17 a month. And adding business cover to your motor insurance will only cost a few pounds per year.

    “If you weigh this up against claims that can rise to millions of pounds, or legal proceedings against you, skipping on the insurance really is not a risk worth taking.”

    The AXA research looked at SMEs who had some level of insurance cover to establish where the gaps in that cover might be. There is also evidence that many businesses, particularly those set up from home, have no insurance at all – in a recent report looking at home based businesses 56 per cent had not notified an insurer that they were running a business from home.

    There are a few exceptions to this eg direct family members working in a non Limited company but the vast majority require EL

    Figures based on average premium for public liability, employers liability and professional indemnity sold online or over the telephone by AXA Business Insurance

    AXA Business Insurance and Enterprise Nation Home Insight Report among nearly 800 home based business in March 2014

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    Notes for Editors 

    Some key insurances for businesses

    Employers’ liability: If a business employs anyone (with a few exceptions – see footnote 3) even if they are part-time, a contractor, sub-contractor or apprentice then employers’ liability insurance is a legal requirement. Trading without it can attract fines of up to £2,500 per day. It provides cover in case you face a claim for compensation if a member of staff suffers injury or illness as a result of working for you. 

    Public liability: This can pay out if a claim for damages is made against a business by a third party, eg a member of the public or a customer, for which the business is found legally liable.  Many insurers will provide a legal helpline and they may pay daily compensation for required court attendance.

    Product liability: provides businesses with cover should someone be injured or property damaged by a product they provide if the business is found legally liable for the loss.

    Professional indemnity: This can protect a business against claims made by a client for “mistakes” made such as providing bad advice that ends up costing the client money.

    Motor insurance: Insurance is a legal requirement if driving any vehicle. Even if only used occasionally for driving to and from work, customers need to check with their insurer and extend the policy to include business use if required.  A courtesy car/van can be extremely important if your vehicle is integral to your business.

    Personal accident: This can be particularly relevant to those working in construction or trades where accidents happen that leave you unable to work for a while.  This may pay out a lump sum or a weekly benefit, up to a maximum limit. 

    Cover for tools and plant: This will cover a business for theft or damage to tools and plant required for the business.

    Cover for business equipment: Will provide cover for laptops, mobiles, tablets and other office equipment.

    Cover for property: Insurance covering Fire and Special Perils (such as storm, flood, riot, theft) will be required for business premises, stock, machinery, plant and office contents. But also if a business runs from a home address, additional cover to regular home insurance may be required

    Cover for the site: Contract works insurance will cover the site while a business is working on it, so if the works are damaged by a fire or storm for example or materials are stolen or damaged, you will be indemnified for the loss.

    Goods in transit: This will provide cover for products or other items sent to customers. If you are using a specialist carrier, they may have a certain amount of insurance in place already but always check this, particularly for valuable items. This cover can also protect your own goods carried in  your vehicle.

    Legal Notes 

    AXA Business Insurance

    AXA Business Insurance is part of AXA Insurance UK plc, which belongs to the AXA group of companies. With us, you choose the business insurance that's right for you. We offer public liability, employers' liability and professional indemnity insurance online to start ups, sole traders, self-employed people and small businesses. In addition we offer van insurance and landlord insurance. AXA Business Insurance also runs Business Guardian Angel which provides resources to help protect and grow small businesses.

    You can follow AXA Business Insurance on Twitter @AXAbizteam, for business insurance help, and @AXABizAngel, for the latest business news. You'll also find AXA Business Insurance on Google+ and Facebook - and you can watch expert guides and business case studies on the AXA Business Insurance YouTube channel.

    About AXA

    The AXA Group is a worldwide leader in insurance and asset management, with more than 161,000 employees serving 103 million clients in 59 countries. In 2014, IFRS revenues amounted to Euro 92.0 billion and IFRS underlying earnings to Euro 5.1 billion. AXA had Euro 1,277 billion in assets under management as of December 31, 2014. In 2015 Interbrand ranked AXA the 1st insurance brand worldwide for the 7th consecutive year.

    In the UK AXA operates through a number of business units including: AXA Wealth, AXA Commercial Lines and Personal Intermediary, AXA Personal Direct and Partnerships, AXA PPP healthcare, AXA Ireland and an independent distribution business Bluefin. AXA employs over 12,000 staff in the UK.

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    The AXA Group is included in the main international SRI indexes, such as Dow Jones Sustainability Index (DJSI) and FTSE4GOOD.

    It is a founding member of the UN Environment Programme's Finance Initiative (UNEP FI) Principles for Sustainable Insurance and a signatory of the UN Principles for Responsible Investment.