One in three SMEs hit by business-critical issues
- 31 per cent of small business owners affected by business-critical issues
- 24 per cent of service providers have no Professional Indemnity (PI) insurance to cover them for these problems
- More than one in five SMEs with PI cover have had to claim on it
London, 9 February 2017: New research1 by Direct Line for Business reveals almost a third (31 per cent) of UK small business owners have experienced business-critical issues that have had a damaging impact on their business, as well as a knock-on effect on their clients.
These incidents include damage to a client‘s business reputation following consultancy services, injuries being sustained on a company‘s premises by clients and the loss of confidential data.
The research also showed that the larger the business, the more likely they are to experience these problems. Only eight per cent of sole traders have experienced problems, compared to 25 per cent of microbusinesses (enterprises with up to nine employees), 41 per cent of small businesses (10 to 49 employees) and 62 per cent of medium businesses (50 to 249 employees).
Direct Line for Business‘ survey of UK small business owners found that the most common incidents were employees being injured on site (29 per cent), having an employee steal money or information from the company or a client (21 per cent), losing a client as a result of giving poor advice (19 per cent) and having a client experience a financial loss because of service provided (18 per cent).
Table One: Most common business-critical issues experienced by SMEs
|Incident||Percentage of SMEs that had experienced a business-critical issue|
|Had an employee get injured while on duty||29%|
|Had an employee steal money or information from you or a client||21%|
|Lost a client as a result of giving poor advice||19%|
|Had a client experience a financial loss because of your advice||18%|
|Had a client suffer an injury as a result of your service/skills||18%|
|Had a client experience damage to their businesses reputation because of your advice||16%|
|Had to hire a lawyer over advice you gave||16%|
|Lost confidential data||15%|
|Had a client suffer an injury on your premises||14%|
|Had a client suffer injury as a result of using one of your products||13%|
Source: Direct Line for Business 2016
Jane Guaschi, Business Manager at Direct Line for Business, said: “Advising clients and running premises comes with its risks, so it‘s important to make sure you have the right safety procedures in place to minimise any potential issues. Even if you‘re professional and always give advice and sell products in good faith, everyone has the potential to make mistakes. The costs of litigation and damages can be steep, so small business owners should ensure they have the relevant insurance cover to give them peace of mind and allow them to get on with growing their business.”
The research found that over two thirds (70 per cent) of small business owners who have experienced these issues said the incident had impacted their business, with the most common outcome being that they had to pay the compensation out of their own pocket. Staff leaving, losing clients and a bad reputation followed in terms of the most common incidents that impact on businesses.
Table Two: Most common outcomes of these business-critical issues
|Incident||Percentage of SMEs experiencing an incident following|
|I paid out of my own pocket as recompense||23%|
|I lost a client(s)||18%|
|It affected my reputation within the industry||18%|
|I incurred a fine||17%|
|I lost an employee(s)||15%|
|I had to lay off staff||14%|
|I had to dissolve the business||13%|
|It did not impact my business||30%|
Source: Direct Line for Business 2016
Jane Guaschi continued: “Small businesses should consider taking out Professional Indemnity (PI) insurance which includes cover for breach of confidentiality and professional duty, malicious acts or omission by former and present employees and loss of data or damage to a client‘s reputation. ”
“If you have customers visiting your premises or are visiting clients at their own premises, then Public Liability (PL) insurance will provide cover for damage by your business to their property, as well as injuries, such as if somebody tripped on a piece of loose carpet in your office and hurt themselves.”
While over a quarter (28 per cent) of SMEs claim not to need Professional Indemnity cover, 24 per cent of the remaining businesses don‘t have any PI cover in place, with 8 per cent claiming not to be familiar with Professional Indemnity at all. Of the companies that do have cover, more than one in five (22 per cent) have had to claim on it, with 10 per cent having to claim on it on multiple occasions.
For further details on Direct Line for Business‘ Professional Indemnity and Public Liability insurance please visit: www.directlineforbusiness.co.uk/small-business-insurance
Notes to Editors
1Direct Line for Businesses‘ research conducted in August 2016 by Atomik Research amongst a sample of 501 UK SME decision makers.
For further information please contact:
Direct Line for Business
Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone and online.
Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.