Advice for SME's on how to avoid insurance scares

Published:  05 November, 2014

AXA Business Insurance warns that many small businesses could be sleep-walking into prosecution and financial difficulties simply because of oversights when arranging their insurance.

Darrell Sansom warns that many small businesses could be sleep-walking into prosecution and financial difficulties simply because of oversights when arranging their insurance

According to recent research, which focuses on the UK’s 4.7 million small businesses, SME's are exposed to more compensation claims than previously thought.

We found that 53% of the UK’s small businesses who employ staff do not have employers’ liability cover or are unaware of the cover, thus running the risk of prosecution or having to shoulder workplace injury claims on their own. When asked, 2,000 members of the public said they felt their work had impacted their health at some point.

When asked about symptoms:

• 62% of UK workers say they have suffered eye strain after using a computer at work – most (53%)describe the symptoms as ‘severe’, while almost a third (28%) say they’ve had pain or ringing in the ears in a noisy workplace;

• 36% have been hurt by heavy lifting at work, while 62% have suffered muscular aches and pains after long hours at a desk;

• 53% of workers say they have had sleepless nights due to work stress;

• 16% have been assaulted at work, with 5% saying the incident was serious.

Not all pains and strains at work turn into a compensation claim, but our findings do indicate that the scope for claims is high and ripe for exploitation by the UK’s army of no-win no-fee lawyers.

We also asked small business owners about their risk of facing compensation claims from non-employees – that is, members of the public who come into contact with their business. Altogether, 43% of businesses that have visitors or work on other people’s properties do not have public liability insurance.

Once again, businesses are more exposed to such claims than they might think. A survey of the general public found that almost half of the population – 48% – have suffered property damage at the hands of a tradesman or other visiting business. At the most extreme end of the scale, 1 in 20 of respondents actually felt that they and their families had been put in physical danger by work done on their property.

The average workplace injury pay-out on behalf of a small business by AXA in 2013 was £14,300; while the average public liability settlement hovered around the £13,500 mark. However, last year, AXA also settled a number of claims that ran into several millions of pounds each on behalf of its small business customers.

We definitely are out to give small business owners a bit of a scare with these figures. It’s an important message: people trust in their insurance and they need to know where the gaps in their cover are. I would urge all businesses to check their policies right now and, if necessary, quiz their insurers on just what they are and aren’t covered for.

If businesses look at nothing else, they really must understand the importance of employers’ liability cover. Not only are there serious legal consequences if you don’t have it, workplace injury claims can reach eye-watering figures. We’ve had employers’ liability claims that run into the millions of pounds for the most serious injuries – a bill like that simply cannot be shouldered by a small firm.

A serious injury or illness is a tragedy for the employee, made even worse if they have to pursue an uninsured employer through the courts for compensation. It also means bankruptcy on top of prosecution for the employer if they don’t have the insurance to pay for the consequences.

Darrell Sansom is managing director at AXA Business Insurance