5 Tips to Consider When Buying Small Business Insurance in '24

Business insurance landscape is changing. Small and medium-sized enterprises (SMEs) started paying more attention to commercial insurance policies since the pandemic began. For example, McKinsey claims that SMEs represent 60% of business insurance premiums in the UK. 

This article will assist SME executives and owners in making decisions about business insurance. As a result, we will examine common coverage packages and points to consider when purchasing an insurance. 

What is business insurance?

Business insurance (also called commercial insurance) is an insurance policy that protects firms from losses due to events that may occur during the daily operations of the firms. Business insurance mitigates the financial damage from events. Some example categories are:

• Commercial property insurance: It mitigates damages to buildings, inventory and equipment due to unintended events such as floods, fire, etc.
• Product liability insurance: It protects a company from the financial burden of legal proceedings relating to the products it manufactures.
• Cyber liability insurance: It is a type of cybersecurity insurance that financially protects companies from the costs of data breaches and other cybersecurity threats.
• Workers compensation insurance: This type of insurance protects the companies that are sued due to workplace accidents. It is required by law in many countries, especially for companies where work-related injuries and accidents are common.

Which insurance policy should you buy?

The purpose of acquiring any insurance coverage is to mitigate the financial consequences of potentially disastrous situations. As a result, SMEs should purchase coverage according to their risk factors. For example, a company that writes articles for SMEs to help them understand business insurance should not purchase commercial property insurance, but instead consider purchasing cyber liability insurance because they do not have a manufacturing building but conduct business through the internet.

Thus, each company should analyze its own unique position. Nevertheless, giving generic advice is possible.

• Regulatory necessities: Certain types of commercial insurance must be obtained by businesses that operate in specified industries or areas. For example, in the United States, any company with employees is obliged to have workers’ compensation, unemployment, and disability insurance. As a result, learning compliance standards makes sense in the first place.
• Does your business use public cloud tools?: Following the pandemic, the average number of SaaS tools used by a firm increased almost more than six folds. Cloud computing advantages assist SMEs, particularly those with a perceived lack of IT capability. However, such tools can expose users to cyber-threats. Thus, if your firm operates in a field where personal data is often used or where a successful breach could paralyze your operations, you should consider purchasing cyber liability insurance.
• Does your business keep valuable inventory or produce something?: If you run a retail firm where merchandise in the warehouse is crucial to your operations, purchasing commercial property insurance is a good idea. Similarly, it is reasonable to purchase such coverages to protect your factory. 
• Are work related injuries common in your industry?: Some industries are more prone to work-related injuries by their very nature. It is reasonable to purchase workers compensation insurance if your company operates in such a sector, even if it is not a legal need.
• Is your production standardized?: It might be hard to get a standard product in certain industries or due to lack of technical capabilities your business might have difficulties to standardize its production. In such cases, it makes sense to buy product liability insurance.   

5 Best practices to buy business insurance

• Find your pain points: As previously said, each business has its own risk profile. Determine them and the kind of commercial insurance coverages you require. Then you can look for insurance firms that specialize in the area of your coverage need.
• Consider price: According to KPMG, the best price is the top priority for SMEs when buying business insurance. It makes sense because insurance coverage is very standard, and SMEs’ budgets are often limited.
• Decide what type of claims processing you prefer: The insurance industry is undergoing rapid change, with some insurtechs using new technology for routine tasks such as claims processing. Some people are digitally savvy and prefer chatbot-assisted online claim handling, while others prefer human interaction. As a result, before you go through the experience, we recommend that you look into the claims processing procedures of potential insurers.
• Digital vs human contact for services: Many insurtech companies use digital platforms for policy signing and underwriting, same to how they do for claims processing. Before you start working with a provider, decide what level of digital service you want.
• Check the licenses of insurers: Agents who specialize in commercial insurance can assist you in finding coverage that are tailored to your company’s needs. When they sell policies, they collect commissions from insurance firms, so it’s critical to pick a certified agent who is a real professional.  

How can you reduce the cost of business insurance?

The cost of business insurance varies depending on the coverage you buy and the coverage limits you choose. Additional parameters include your sector, staff count, turnover, and location. Smaller, low-risk firms pay less for insurance.

Reduced risk factors would allow your insurance company to lower premiums. As a result, it is advisable to improve your working conditions before purchasing workers compensation insurance or improving your company’s cybersecurity posture before purchasing a related policy.

Further readings

Here is our selection of 5 insurance related articles:

• Top 5 Technologies Enabling Better Insurance Fraud Detection: Insurance fraud costs around $100 billion per year in the US. By using 5 technologyical tools, which we explain in more detail in this article, insurers can prevent fraud more effectively. 
• How is AI Changing the Health Insurance Practices?: Health insurance generates more than $1 trillion in revenue in the. U.S. annually. In this article, we show how AI/ML models can be used by insurers to improve their efficiency.
• 6 Ways IoT will Change the Insurance Sector: The rapid proliferation of smart devices is transforming the insurance sector. To learn how; you can read this article.

You can also check our top insurance suites list.

If you want to know more about the latest trends in insurance, you can contact us.