Mitigate Your Risks Through Insurance

Managing Your Risks Effectively

Office and/or professional indemnity insurance quote

Hiscox's SME Risk Barometer research study revealed that, slowly but surely, SMEs are waking up to these dangers. Nearly three in five SMEs (59%) are spending more time looking at risk management issues than they did two years ago. However, despite this, less than one in five SMEs (18%) have Employment Practices Liability Insurance (EPLI), which protects employers against costly discrimination claims brought by employees. In addition, at a time when there is considerable concern over the impact of United States business law on UK-based businesses, the survey found that only 15% of SMEs have Directors & Officers' (D&O) insurance.

Any director, officer or manager of a company could be exposed by law to unlimited personal liability, with cases like Enron demonstrating the importance of D&O cover. Such cover protects company directors personally for claims brought against them in their capacity as a director or officer of their company. Smaller-sized businesses can be just as vulnerable to D&O claims as the big multi-nationals but with potentially more ruinous outcomes, where the reliance on one or two key individuals is all the greater.

The problem is that SMEs are still buying insurance based on its cost rather than making a comprehensive assessment of their risk exposure and buying insurance accordingly. It is only when they make a claim that they realise that their losses are not fully covered. Moreover, entrepreneurs and proprietors of small businesses are usually buying insurance for their physical assets such as their office building, its contents and equipment only. These are all necessities, but are not useful if they are facing a legal claim. EPLI and D&O insurance should complement these policies.

With so many considerations to take into account when setting up or running a small business, insurance against legal costs incurred as a result of a dispute often falls down the priority list. The problem is that many organisations approach risk management with the frequently-held view that resources spent on it could have been used on more profitable activities. A report on risk management among SMEs by the Institute of Chartered Accoutants revealed that the general risk profile of a company is discussed annually or less often at 27% of businesses. This is not good enough.

SMEs are under considerable pressure, whether they are dealing with rising energy costs, fighting their way through business taxation rules or interpreting the myriad Government regulations they now face. The continued growth in the UK's compensation culture is very much evident and SMEs are right to worry about legal claims, both spurious and real. The real question is, can your business afford not to be insured?

Get a quote and buy online in minutes for office and/or professional indemnity insurance