Small businesses may not get the same level of media attention as larger Fortune 500 companies, but they’re quietly working away to bolster the economy, provide jobs to millions, and navigate the underinsurance crisis. Businesses with fewer than 50 employees account for 45% of all private sector jobs and keep roughly 56 million Americans employed.
For a small business owner, a few bad months or a single large loss can put the entire operation in jeopardy. Without the resources and reserves of larger businesses, many small businesses operate under the looming threat that they might not be able to cover the costs of a major insurance claim or lawsuit, and the financial losses would force them to close their doors. This makes appropriate insurance coverage more than a nicety, but a necessity. Yet, according to a recent study from global specialty insurer Hiscox, three out of four small businesses in the United States are underinsured. So while they may have some financial buffer, it still may not be enough to fully cover the costs of a catastrophic event that could tally up millions in financial losses.
Underinsurance in Small Businesses
Based on the Hiscox survey, the majority of small-business owners know that insurance is an important part of protecting their business — 68% purchase coverage out of concern for potential claims. Of the small businesses surveyed:
- 65% have general liability coverage
- 45% have property insurance
- 35% have workers compensation
- 32% have professional liability insurance
Despite these numbers, the report indicates that many small businesses don’t understand what their insurance policies cover. The vast majority (83%) couldn’t correctly describe what a general liability policy is, for example. This points to a significant gap between small-business owners’ knowing that insurance coverage is important and understanding exactly what they need — which is where the retail insurance agent can step in as a trusted and valued partner.
Knowledgeable Agents Are a Vital Resource
For the small-business owner juggling several different roles and responsibilities, insurance may not be something they routinely think about — until they need it. Though this is certainly not an exhaustive list, there are several ways you, as a retail agent, can support your small-business clients in the coming year.
- Listen and ask follow-up questions. Take the time to thoroughly understand your small-business client’s specific needs and the risks associated with their industry and business operations. Many small-business owners may not know what kind of information or details are worth sharing, so be sure to probe and ask lots of clarifying questions.
- Conduct regular risk assessments. As the Hiscox survey points out, small business owners often aren’t aware of what they need or the full range of risks their businesses face. Regular risk assessments can help you, as their agent, identify emerging risks and make appropriate recommendations for coverage.
- Offer risk management solutions. While it’s impossible to eliminate risk, there are ways businesses can reduce their overall risk profiles and avoid inconvenient and costly situations before they even occur. By taking advantage of risk management resources, small businesses are also in a better position to negotiate more competitive rates.
- Personalize insurance packages. Insurance is rarely a one-size-fits-all solution. Working alongside your clients to tailor policies to address their unique needs can help ensure they have appropriate coverage with adequate deductibles and limits.
- Proactively educate clients. Small businesses may not know that certain coverages are available, much less that they need them – cyber insurance is a good example. Taking the time to proactively educate small business clients on coverage types, benefits, and potential gaps can help them make informed decisions.
- Review policies annually. Schedule annual policy reviews to ensure that coverage aligns with the evolving needs of the small business. Update policies as necessary to avoid underinsurance and address out-of-pocket exposures.
Whether your clients operate a small self-storage business, a family-run hobby farm, or a local landscaping company, MiniCo is your go-to resource for specialized coverage that meets their unique needs. Contact MiniCo today to learn more about our exclusive insurance programs.