Business Insurance Adoption on the Rise, But Confidence Lags Behind
A recent nationwide survey of 500 small business owners conducted by NEXT has revealed a significant gap between the adoption of business insurance and the confidence of small business owners in managing risks. While 92% of respondents reported having some form of business insurance – a 20% increase from 2023 – only 13% feel completely prepared to face potential threats.
The survey highlights a mixed picture of progress and persistent challenges in how small businesses approach risk management. The majority of small businesses (62%) have general liability insurance, and there have been notable increases in other types of coverage, including workers’ compensation (49%), professional liability (31%), and cyber liability insurance (27%).
Confidence Gap Persists Despite Increased Coverage
Despite the rise in insurance adoption, the confidence of small business owners has not kept pace. Less than half (47%) of respondents reported feeling “very” or “completely” prepared to face risks, with only 13% feeling fully prepared. This confidence gap is concerning, given that nearly half of the respondents identified professional mistakes as their top concern.
The survey also sheds light on the reasons behind the purchase of business insurance. Protection against financial loss was cited as the primary motivator (32%), followed by gaining peace of mind (21%), and protecting employees or customers (18%). However, only 14% of respondents reported tailoring their insurance to cover risks specific to their business, suggesting a potential gap in understanding the unique needs of each business.
Barriers to Insurance Adoption
For the 8% of small businesses that remain uninsured, cost and confusion are significant barriers. More than half (53%) cited insurance as too expensive, while 35% didn’t feel it was necessary for their business. The survey also found that 30% were unsure about the type of coverage they needed, and 18% felt they didn’t have the time to research and purchase coverage.
Understanding Insurance: A Major Challenge
The survey revealed that 69% of small business owners struggle to understand coverage options, limits, and policies. Despite this, a significant majority (87%) trust their insurance company to support them in times of need.
The findings suggest that insurance providers have an opportunity to better support small businesses by addressing the confusion and complexity surrounding business insurance. By doing so, they can help bridge the confidence gap and ensure that small businesses are adequately prepared to face potential risks.
