Risky businesses: Two thirds of SMEs unprotected
Number of UK Small and Medium Sized Enterprises (SMEs) with Professional Indemnity Insurance (PII) grew by 235,000 between 2013 and 2014 – but two thirds have no cover at all
- Number of UK Small and Medium Sized Enterprises (SMEs) with Professional Indemnity Insurance (PII) grew by 235,000 between 2013 and 2014 – but two thirds have no cover at all
- Sole traders make up majority of new policies over the past year
- Direct Line for Business launches new Professional Indemnity insurance product
New research1 from small business insurer, Direct Line for Business reveals that only a third of SMEs (37 per cent) currently have Professional Indemnity insurance (PII). Not all SME’s will require PII cover but those that do out of the remaining 3.3 million of the UK’s 5.2 million SMEs could find themselves uninsured, should their clients suffer a financial loss as a result of negligent or poor advice.
The analysis, conducted to support the launch of Direct Line for Business’s Professional Indemnity Insurance product, suggests that only 733,000 SMEs (14 per cent) are considering taking out PII in the next 12 months.
Despite the number of SMEs taking out PII growing by 235,000 – or 14 per cent – last year, without sole traders, there was a significant fall in the number of micro (-15 per cent) and small (minus six per cent) businesses taking out PII policies. Direct Line for Business warns that this is a dangerous prospect because businesses risk financial ruin without the appropriate PII cover.
|Change in number of UK SMEs with Professional Indemnity Insurance (PII), 2013-2014|
|Business size||SMEs with PII, 2013||SMEs with PII, 2014||Change, 2013-2014||Percentage change, 2013-2014|
|Micro (2-9 employees)||516,203||438,629||-77,574||-15%|
|Small (10-49 employees)||223,688||210,542||-13,146||-6%|
|Medium (50-249 employees)||86,034||87,726||1,692||2%|
Source: Analysis by Direct Line for Business, 2015
Gary Holmes, Products Manager at Direct Line for Business, said: “The number of sole traders with PII has risen sharply over the past year, underlining the importance these entrepreneurs are placing on protecting themselves from the potential knock-on effect of a client suffering financial losses. That said, there are still a large number of businesses who are offering services or advice that don’t have the right cover in place, thus exposing their businesses to huge risks that could cripple their enterprises.
Without the right cover, providing incorrect advice or losing data could end in financial ruin for an SME.
Our recent introduction of Professional Indemnity Insurance not only allows us to offer a product our customers have been asking for, it also means Direct Line for Business has a comprehensive set of small business insurance products to cover our customers’ needs.”
When broken down by industry, Direct Line for Business’ analysis revealed that SMEs in the legal services industry were most likely to have PII, with 88 per cent of businesses taking out insurance. This is followed by financial services (59 per cent) and scientific, technical and engineering research (52 per cent). SMEs in transportation (12 per cent) and retail and wholesale (11 per cent) are the least likely to have PII cover.
Recent research revealed over 320,000 businesses had been affected by poor advice over the last 12 months2, underlining the importance for SMEs having suitable insurance cover in place.
Direct Line for Business Professional Indemnity Insurance provides cover to consultants, freelancers, contractors and other such services against claims made by their clients for financial loss, or reputational damage due to negligent advice, design or services. The policy covers the legal costs for defending the claim as well as any compensation paid out.
For more information on Professional Indemnity Insurance and how to protect yourself from legal costs and compensation in cases of negligent advice, visit: professional indemnity insurance.
Notes to editors
1 Direct Line analysis of YouGov and ONS data covering SME numbers and PII cover for 2013 and 2014, conducted in August 2015
2 Research conducted online by Consumer Intelligence fore Direct Line for Business. Total estimates based on 2.26m small enterprises in the UK, as recorded by the ONS
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 or on-line.
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.