With the vast majority of businesses in the US described as “small,” small businesses serve as the backbone of the American economy. However, many business owners may not have adequate insurance protection to guard their business against everything from minor interruptions to catastrophic events that can affect income streams and the business’s ability to survive.
For many small business owners, their largest asset is their business. It’s how they keep food on the table and their mortgages paid. Finding and working with a trusted insurance broker and partner who has the depth and breadth of small business experience is critical, especially in today’s challenging insurance marketplace. The broker partner can outline potential areas of risk unique to the business and its industry and recommend types of insurance products and levels of protection necessary to be prepared for the unexpected and mitigate risks to the operation of the business. Brokers, or independent agents, also serve a particularly important role in ensuring all insurance companies and coverages have been fully explored before making a professional recommendation. Small business owners often misunderstand the true value a broker brings to them.
An easy comparison might be, if you were looking to book a flight for your next vacation would you use a comparative travel site or go directly to the airline? Most of us today find value in the comparative sites, not because we are only looking for the lowest price, but because we want to see all of our options so we can ensure we’re making the right choice that aligns with our needs. This is the same role a broker plays in the placement of insurance and the confidence and transparency that small businesses want and need.
Today’s insurance marketplace is a very challenging one, due in large part to the frequency of catastrophes caused by climate change. Take for example climate and the impact it can have on a small business. The entire concept of insurance is based on precedent. But across our world, we’re seeing anything but. Instead, we’ve seen unprecedented events like new flooding areas along more densely populated coastlines, wildfires occurring in places where they haven’t historically, and freezing across parts of the country that rarely, if ever, dip below 32 degrees. Can your business operate when the power grid goes down due to a freeze? Can it operate remotely if you have to evacuate from a fire or flood? And while your business may not be located in an area of the country that experiences these events, are your partners? Your suppliers? Your customers? How long can you operate in a silo until they come back online?
Cyber risk is another area of risk that can devastate a small business. From hacks that compromise trade secrets to those that threaten to sell client data, threat actors look for ways to monetize however they can and do so quickly. Insurance policies for cyber often come with table stakes. Businesses must show they’re incorporating safety measures to reduce their risks to receive the policy. This added layer of protection helps deter attacks while the policy is designed to make a company whole in the event an attack does happen.
However many businesses underestimate their cyber security needs. It’s not uncommon for threat actors to get into systems to discover what’s available for them to monetize, including the limits of a cybersecurity policy. Just turn on the evening news and you’ll find almost daily reports of new cyber attacks. If these hackers can infiltrate the largest and most secure companies in institutions, you can bet they can hack into a small business’s servers. When data is held for ransom, often the ransom amount is equivalent to the limits of the cybersecurity policy. But this isn’t always indicative of the full costs of being hacked. Some hacks require new hardware, new software, and many other expenses that will fall outside of the policy limits. Stacking more than one policy might be something for your business to consider depending on your risk.
Technology advancements in small business insurance have allowed owners to shop for policies and purchase insurance from their phones. But for owners who don’t do the research or understand the variety of coverage available and what their business may need, purchasing independent policies is limiting and lacks the risk management strategy necessary to weather a storm. This is where the importance of working with an insurance professional and trusted advisor is so important.
Cash flow for small businesses is usually limited and doesn’t provide much of a safety net should something go wrong. And often insurance is the first thing to be dropped when things are tight. However, having the option to file an insurance claim can be massively impactful to that business and allow it to remain operational in the event something goes wrong. Insurance is financial risk management, it is there to ensure that the business can continue to thrive even when the unexpected happens.
Jen Tadin is the Global Small Business Practice Leader for Gallagher Global Brokerage, US.
Small business insurance stock image by G-Stock Studio/Shutterstock
