Findings from a recent study by NEXT Insurance highlight a significant gap between small business owners’ biggest stressors in 2023 and what they’re prepared for when it comes to their insurance knowledge and coverage.
The main takeaway from the data: insurance is often a blind spot for small business owners.
A total of 90% of the 500 US small business owners surveyed are not confident that their business is adequately insured. More than half of participants cited making a professional mistake as the top potential risk with the power to negatively impact their business this year.
Additionally, 96% of respondents did not score 70% or higher on a general insurance knowledge test. Only a third report seeking professional help when it comes to their insurance needs. At the same time, however, 82% are taking steps to better protect their business – such as reviewing their coverage or carrying out a risk assessment.
According to a NEXT press release, small businesses often lead the way for the larger American and global economy. When small businesses start to feel squeezed by inflation, supply chain issues, staff shortages and more, it signals broader challenges.
NEXT uses artificial intelligence and machine learning to underwrite insurance policies for small businesses. The company conducted its survey in early 2023 to find out what challenges are most important to small business owners, how prepared they feel for insurance challenges, and to test their knowledge of general liability insurance.
The main findings are detailed below.
Small Business Owners Sweat the Small Stuff (and the Big Stuff)
More than half of respondents (51%) cited making a professional mistake—everything from workplace accidents or HR issues to technical errors—as the top potential risk with the power to negatively impact their business this year. Small business owners surveyed also agreed on their top stressors for the coming year: 68% were most concerned about inflation, followed by reduced consumer spending, a potential recession and supply chain issues.
Most small businesses are underprepared and underinsured (and some are doing well)
Although 90% of small businesses lack confidence that they are adequately insured against their most worrying risks, more than a quarter of those surveyed (29%) have no business insurance coverage at all. More than half of respondents (51%) say their business is less than “very prepared” to meet potential risks, but 18% of all respondents are not taking or plan to take any steps in the next 6 months to – good protection of their business.
Insurance rivals taxes as a small business knowledge gap
For many small business owners, understanding the complex insurance landscape can be difficult. More than half of those surveyed (53%) say their biggest obstacle to getting insurance comes down to knowing what coverage and policies their business needs. Despite not knowing where to start, only a third will seek professional help (despite their considerable concern about making a professional mistake – many of which could potentially be covered by the right insurance). When asked about the specifics of General Liability insurance, 96% of respondents did not receive a positive rating (70% or higher). None of the 500 respondents received a perfect score, indicating that many still need the right support to navigate the industry.
Not all small business owners are the same, so insurance needs to be tailored
Survey respondents included men and women; cities, rural areas and suburbs covered; and counts entrepreneurs of all generations, identifying differences that show how diverse small business owners are—and how their insurance needs (and knowledge) vary. Rural business owners are more concerned about inflation than their suburban counterparts (71% vs. 64%). Cyberattacks or data breaches keep small business owners over 45 awake at night compared to those under 45 (41% vs. 30%). Female small business owners face a more challenging insurance journey than their male counterparts: women are more likely to perceive their knowledge of coverage and policy needs for their business as a barrier to obtaining insurance compared to men (60% of women compared to 50% of men). Women are also more likely to have no insurance (35%) than men (25%).
Read more about the survey 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 taxes and insurance to finance and human resources. That’s an unrealistic expectation, and fortunately there are many resources designed specifically to help small businesses with the guidance, education and tools they need to address some of the most common challenges they face,” said Alon Sheeran, VP of Product at NEXT.
He continued: “Insurance can be a daunting part of running a business, especially because without the right coverage, businesses can suffer significant financial losses that could lead to or break their bottom line. Our goal at NEXT is to eliminate that burden with a simplified digital shopping experience, built-in partner offerings, personalized policies, accessible resources and in-depth expertise so small business owners can focus on what matters most – running their business .”
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