Research highlights lack of SME protection

Legal & General's latest research has revealed that for SMEs who had taken out protection, 89% did so because they were advised to do so, demonstrating the real need for professional financial advice in this market.

Related topics:  Commercial,  Commercial finance
Amy Loddington
3rd March 2015
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Worryingly the research also revealed a lack of protection in place, indicating that many SMEs are not aware of the dangers they could face should a key member of staff or owner become ill or die.  For example, 40% of small businesses said that they would cease to trade within a year of losing a key employee or owner yet almost 60% have no cover in place for Key Person cover.

The report clearly shows that awareness of the risks have grown since Legal & General’s first report into this market back in 2009. However a large proportion of businesses do not have the protection they need. 72% said they had not taken out cover because they did not see the need of it, had never considered it or had not been made aware of the risks.

The latest figures also found that the average UK SME is worth £3.1 million and generates a profit of £620,000, is a 48 year old male and has been trading for 12 years. For the first time, Legal & General has also looked at the different make up and needs of small business based on various factors ranging from the age of the company through to the differences for male and female owners.

Richard Kateley, Head of Specialist Protection of Legal & General Insurance, said:

“25 million people in the UK are currently working for a small company. Our state of the Nation’s SMEs research not only highlights the wide variety of small business owners that we have in this country, but also how important they are to the UK’s overall economic health. Helping these dedicated professionals and entrepreneurs overcome any obstacles they face, whether it’s a business issue or the loss of a key member of staff, is crucial. Business owners are very good at planning what would happen if they faced an IT failure or security breach, yet often overlook financially protecting the business through a lack of awareness or education. Our campaign is to help raise awareness and provide financial advisers with opportunities to discuss the importance and need for business cover with their clients.

“Clearly business owners have the best interests of their company at heart, but our research shows that many people are unaware of the risks with 50% saying it is not something that they have ever considered. As such, there is a real need for advisers to guide their clients through the products available and make sure they are prepared for whatever the future may hold to protect their business, their staff and their families. The great news for advisers in the research, for me, was that 90% of those questioned said that they would want to talk to a financial adviser about business protection but less than half have a business financial adviser. It’s about helping advisers to help get business assured.”

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