Are SMEs gambling with their futures?

A great deal of small and medium-sized businesses are gambling with their futures by failing to have insurance cover, according to new data from the insurer Zurich.


According to the firm’s SME Risk Index, nearly two thirds of SMEs risk severe impacts on their business operations through not having adequate protection insurance.


This would cover owners and key employees – the driving force behind many smaller companies – states the insurer and would provide protection in the instance of unforeseen absence.


The quarterly survey looks at the perceived level of business risk faced by smaller companies and 56% suggested that their company could struggle were their business owner to die or face critical illness.


For the survey, company decision-makers were quizzed by YouGov on behalf of Zurich, and a further 45% said the death or critical illness to a key employee would also damage the chances of business success.


Around half of the respondents who highlighted this issue also said such a death or loss would severely damage the management structure of a company as a significant gap would be created.


When it came to finding a replacement, 44% said it could lead to a skills shortage while 43% were concerned that a similar quality replacement would simply not be available.


“These are stark findings which show too many SMEs are taking a gamble by not taking out protection insurance for their business owners and key personnel,” said Chris Atkinson, Retail Protection Proposition Manager, Zurich UK Life.


“These companies rely on the talent, know-how and experience of a few people who are vital for the business success.


“In the event of the death or serious illness of one of them, the survival of the entire company could be at risk.”


Should such a situation occur, those remaining at the business could have little choice but to consider corporate insolvency procedures and the potential liquidation of the company.


This would especially be the case if the person who is lost plays a significant role in supplying or managing the financial aspects of the business.


Aspects of insurance such as key person protection could help should a situation occur but it would rely on the business having the necessary cover in place beforehand.


By Phil Smith


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