Why do I dislike these two tasks so much? Simple answer – they are both painful experiences!
I doubt I’m alone in the first as there can’t be many SME owners/employees or self employed that can honestly say they enjoy the preparation of annual returns to HMRC to tell them how much of their hard earned cash they should willingly hand over to the Government by way of Corporation Tax, PAYE, VAT etc etc especially when you read of how the big players like Google, Starbucks and the like are able to negotiate incredibly low, almost non-existent levels of tax on profits.
But why do I hate it when it comes to renewing the many insurance covers for the business? Deep down, do I understand the benefit of something I never want to have to use? What is D&O? Will the business ever get big enough not to need Keyman – do I need it at all? Is all insurance compulsory? What are the risks if I don’t take out insurance? Do other SMEs feel the same?
When starting a business, it’s unlikely that you’ll know the answer, or indeed have any experience, of everything that’s involved. You’ve probably got a particular skill or idea and a desire and the drive to go it alone. You’ll get help from accountants and solicitors, banks and many other sources to get you started and the chances are you’ll be advised to take out some insurance… but where do you start and once you have got insurance, how do you know you’re getting the best advice thereafter?
The current radio advert for Hiscox “Insurance for the Small and the Brave” is spot on – people in SMEs are frequently required to multi-task at different levels – Company Secretary one minute, office cleaner the next. The Government defined 5.1million UK businesses in 2015 (a staggering 95% of all businesses) as micro-businesses, employing 0-9 people yet accounting for 33% of the UK’s total employment and 18% of the UK business turnover, there is a huge market for insurance but is the SME market being well served?
Thinking of my own experience, I’m not confident that the answer will be yes. Of course the recommendation from the accountants, solicitors and bank was to take out insurance so we did… I can’t remember how we picked our first broker – probably recommendation from a trusted source... having first googled where/how to buy office insurance no doubt. But that was okay, wasn’t it? We had cover and were advised it was adequate for our needs. What have we done since though?
Most if not all SMEs look to keep overheads to a minimum so pricing is important and with the ability to get quotes direct from insurers, isn’t this the best route – direct to market? Possibly, but how do I know that I’m asking for the right type of insurance, giving the correct response to get the best price. But what is best – cheapest price or most appropriate cover? By typing in “buy commercial insurance online”, it took 40 seconds to get 125,000,000 results in a Google search! That’s some reading and as all SME owners will agree, time is a very precious resource.
So, I fall firmly into the ‘no DIY’ for me camp which means that I’d happily take the advice of those better qualified than me to search out insurance which is right and appropriate. Good news for insurance brokers as there are many more who are likely to be of the same mindset.
With over 125m hits for buying commercial insurance online, there is obviously a great many options/pitfalls/products that need to be considered and whilst every business will have (or believes it has) its own individual needs, are these being catered for by the Insurers? With the FCA’s own review concluding that there is a gap between SME expectations and insurance claims services it doesn’t immediately inspire confidence that the SME market is being well served. More worryingly, the same report stated that the review found “A significant number of instances where the sums insured were inadequate to cover the loss incurred. The underlying reason for this was not always apparent but [the] review did highlight the material impact this could have on the claim.”.
On renewing our professional indemnity insurance one year, I was given an application form for another profession – very different from ours, yet a service industry none the less. When I queried if this was the right form, I was advised that this was “the same type of business” in respect of likely risks so, yes, it was the right form. I didn’t get the sense from the broker that they knew much about OUR business, nor indeed that they were bothered as long as I completed the details and took out the cover.
Of course, I appreciate you can’t have individual policies for the myriad of companies and broadly speaking, the risks are the same, but I couldn’t help but feel disappointed that the broker concerned appeared to have so little interest. A feeling reinforced by being asked to complete the details almost on policy expiration so any thoughts of “a thorough market review” didn’t seem to hold much weight. Interestingly, a quote materialised very quickly – within a few hours suggesting that remaining with the current underwriters would be the best option. When challenged with having found a cheaper alternative quote via another broker, the price could be ‘renegotiated’ with the current underwriter to match the alternative. Was the broker working in my best interest or theirs? Could I trust them if they were so quick to reduce the price without questioning or confirming that cover was being offered on a like for like basis? Fortunately, we’ve not had to claim but I can’t help but wonder if I’d find myself actually underinsured rather than fully insured as some have discovered as highlighted in the FCA report finding.
What do I need my broker to do for me? I need them to understand, advise, explain, recommend. Is this the reality for SMEs or do they get sent renewal forms, or a call asking if anything significant has changed followed by a note of cost for renewal for the next year?
Are SME owner/managers honest enough to say if they don’t understand the jargon. Who knows and how can it be improved? If SMEs account for 99% of all UK businesses (including the 95% micro-businesses), they could (and should) be able to shape the future of industry anxious to serve their needs. The Insurainsight360 survey is a fantastically easy way to share SME experience whilst at the same time helping to identify what needs to be done for future industry development. Truly independent, jargon free with no hidden agenda to sell anything, you could do worse than spend 5 minutes… It will certainly be less painful than filling in HMRC annual returns!