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Liability Insurance - UK Businesses are Lacking

liability insurance ukThousands of businesses in the UK are risking substantial legal fines or bankruptcy because they do not possess a liability insurance policy, according to a leading insurer’s research. The insurance research revealed that a staggering 350,000 small businesses are lacking an employers’ liability insurance policy. It is a legal requirement for most businesses to have employers’ liability cover, risking a fine of £2,500 a day if they are caught. The Health & Safety Executive deals with these fines, with only a few businesses being exempt (such as a business that only employs family members).

The report showed that 1 in 14 small and medium sized enterprises (SMEs) did not have the required employers’ liability insurance certificate. In addition, 1 in 20 small businesses have no general insurance cover, which works out to approximately 230,000 firms across the UK. Insurance is one area that businesses should not overlook – a tragic accident such as a fire could end trading completely because the repair costs would be impossible to cover. Firms will also be in danger if they are sued by a client or employee if they do not have the applicable liability insurance cover.

LV Insurance’s commercial lines director Mike Crane said: “This research shows that thousands of small businesses are leaving themselves vulnerable to financial ruin by not taking out the appropriate insurance cover. Those businesses employing staff are particularly vulnerable.”

The research data shows that there has been an increase in the number of employers’ liability claims, putting the blame down to the rise of the UK’s ‘compensation culture’ in combination with the current rough economic climate. Slip, trip and fall liability claims currently make up the second largest number of claims, just behind claims due to theft and damage caused by leaks, storms and accidental damage. 6% of small and medium sized businesses were found to not have any public liability insurance cover. Business interruption cover is also important for businesses, but only 60% of small businesses have the applicable cover. If you are un-insured, any devastating losses to your firm are more than likely to result in your business going under.

The data also revealed that the cost of business interruption claims had increased by 9% in 2012. Crane added: “In today’s culture where compensation claims are on the rise, SMEs could find themselves thousands of pounds out of pocket if they do not have the adequate insurance. As we’ve seen in recent times, with riots, freezing winters and floods, there are many very real risks to SMEs which would prevent them from trading. Being insured for business interruption can therefore be make or break for a small business.”

James Savery, 24 September 2013

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