Slow insurer response times put SMEs at risk
Insurance firms are often too slow to react to small business losses, which can leave the firms at risk of going out of business, one insurer has claimed.
According to MGA and loss recovery firm Lorega, little progress has been made in recent years from when the Financial Conduct Authority found similar outcomes two years ago.
It is suggested that the claims process is not quick enough to support small firms, many of whom lack the financial capital to get back up and running promptly after an incident.
The insurance firm found that the majority of SMEs said their claims amounts were not agreed quickly enough, a factor that Lorega Managing Director Neill Johnstone believes could cause firms to go bust.
“The worst-case scenario is that you never recover from your loss,” he explained, before adding that many small businesses require quick access to finance to overcome their troubles and get back trading.
Given the lack of reserves of capital at most small businesses, their ability to trade can be severely hampered by an incident that causes as little as £10,000 of impact.
Without finance to repair damage, repurchase stock or to carry out basic works, a firm could be left facing insolvency if all other options are exhausted.
Mr Johnstone also warned that any negative impacts may not be noted for several months after an incident, as any lost custom might not immediately be apparent.
“Ultimately you might get your insurance claim paid, but then you go bust six months, or a year down the track, when you’ve been unable to recover all of your business,” he explained.
A range of alternative finance options to aid cash flow difficulties and a struggling business should seek guidance on what could be the best option for them.
Short and long-term solutions are available that can help to meet a variety of different business requirements.
By Phil Smith