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The results of a recent survey by NEXT Insurance show a significant gap between the top stressors for small business owners in 2023 and what they are prepared for in terms of their insurance knowledge and coverage.
The overarching insight from the data: Insurance is often a blind spot for small business owners.
Overall, 90% of the 500 small business owners surveyed in the US lack confidence that their businesses are adequately insured. More than half of the participants identified a professional mistake as a top potential risk that could negatively impact their business this year.
In addition, 96% of those surveyed did not achieve a grade of 70% or better in a general insurance knowledge test. Only a third said they had sought professional help with their insurance needs. At the same time, however, 82% are taking steps to better protect their business – like reviewing their coverage or conducting a risk assessment.
According to a NEXT press release, small businesses are often a frontrunner for the larger American and global economies. When small businesses feel pressured by inflation, supply chain issues, staff shortages and more, it signals broader challenges.
NEXT uses artificial intelligence and machine learning to issue small business insurance policies. The company conducted its survey in early 2023 to understand which challenges matter most to small business owners, how they feel prepared for challenges from an insurance perspective, and to test their knowledge of general liability insurance.
The main results are listed below.
Small business owners sweat the small stuff (and the big stuff)
More than half of those surveyed (51%) cited a professional error – from work accidents or staffing issues to clerical errors – as the top potential risk that could negatively impact their business this year. The small business owners surveyed also agreed on their top stressors for the year ahead: 68% are most worried about inflation, followed by lower consumer spending, a possible recession and supply chain issues.
Most small businesses are underprepared and underinsured (and some are fine)
Although 90% of small businesses are unsure they have adequate insurance against their most worrisome risks, more than a quarter of respondents (29%) have no business insurance coverage at all. More than half of respondents (51%) say their organization is less than “very well prepared” to face potential risks, but 18% of all respondents are not taking or planning any steps to better protect themselves in the next 6 months her business.
Insurance competes with taxes as a knowledge gap for small businesses
Understanding the complex insurance landscape can be difficult for many small business owners. More than half of respondents (53%) said their biggest barrier to getting insurance is knowing what coverage and policies their business needs. Despite not knowing where to start, only a third seek professional help (despite their grave concern about making a career mistake – many of which may be covered by the right insurance). When asked about the specifics of general liability insurance, 96% of respondents failed the grade (70% or higher). None of the 500 respondents received a perfect score, suggesting many still need the right support to navigate the industry.
Not all small business owners are the same, so insurance needs to be tailored
Respondents to the survey included men and women; spanning cities, rural areas and suburbs; and considered entrepreneurs of all generations and identified differences, showing just how different small business owners are — and how different their insurance needs (and knowledge) are. Rural entrepreneurs are more concerned about inflation than their suburban counterparts (71% vs. 64%). Cyber attacks or data breaches keep small business owners up at night over the age of 45 compared to those under the age of 45 (41% vs. 30%). And small business owners face a more difficult insurance journey than their male counterparts: women are more likely than men to perceive their knowledge of the coverage and insurance needs for their business as a barrier to purchasing insurance (60% of women vs. 50% of men). Women are also more likely to have no insurance (35%) than men (25%).
Read more about the poll results on the NEXT blog.
“Small business owners today have to wear a number of hats and often feel pressured to be experts in everything from tax and insurance to finance and human resources. This is an unrealistic expectation and fortunately there are many resources specifically designed to support small businesses with the guidance, training and tools they need to overcome some of the most common challenges,” said Alon Shiran, VP of Product at NEXT.
He continued: “Insurance can be a daunting part of running a business, particularly because without proper coverage, businesses can suffer significant financial losses that affect or could affect their bottom line. At NEXT, our goal is to remove that burden with a simplified digital shopping experience, embedded offers from partners, customizable policies, accessible resources and deep expertise so small business owners can focus on what matters most – running their business.”
Themes Trends Commercial Lines Business Insurance
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