With the economic climate still proving tough and the business climate more and more competitive, small business owners are feeling the pinch now more than ever. In a recent study by AXA, business owners were asked what they thought were the biggest risks facing their business. They cited a multitude of key risks, demonstrating the range of difficulties that have to be navigated by startups.
Nearly half of the respondents (48 per cent) cited theft as a risk, while more than one in ten said it was the main risk facing their business. Despite the government’s recent efforts to boost lending, cash flow remains the most common stumbling block for startups, with 40 per cent of respondents citing it as a top-ranking risk and one in seven highlighting it as the main risk facing their business. 40 per cent of respondents also identified accidental damage and being sued by a client or customer as other top-ranking risks.
British SME: Could you start by giving me an overview of Axa’s offering to SMEs
Darrell Sansom: Axa has been providing solutions to small businesses for a number of years. What we see, particularly in the micro sector – up to nine employees – and particularly trades and professionals is a month on month increase in searches through Google for business insurance policies. And combined with the feedback we were getting led us to believe there was a very strong appetite for an online experience.
There remained issues over the flexibility of the product and confidence in buying online. If you take home insurance, for example, there’s a belief that one policy is very much like another, therefore people feel competent enough to buy it. That’s different when it comes to commercial insurance. It’s about what do I need, how much do I need, when do I need it. And there’s less understanding of what different products do. So there was a belief that buying business insurance is complex.
So we’ve tried to remove those inhibitors to allow our customers to fulfil their requirements, and that’s what we’ve done with the investment in our new website.
BSME: What’s your involvement with StartUp Britain?
Sansom: The current economic climate means there are fewer options available for people. So people coming out of school or university are finding there are fewer jobs available, so starting a business becomes a real option. Then the larger companies are contracting, so you have people who come out with a bit of a redundancy payment and are looking for other options. So what we’re seeing is a community looking for a solution and we’re trying to support them in starting up a business and making it successful.
These people are experts in what they do, but they are not experts in being a business – a builder may be a great builder but that doesn’t necessarily mean he’s going to be great at running a builder’s business. You may not have the first idea of the need for employers’ liability insurance because you’ve never had to worry about it. And if you can get a new business through their first year, there’s a significant chance they will continue to flourish. We’re the insurance experts within this field but the role is wider than that – it’s about how we can support small firms get up and running.
BSME: From the research you’ve done, are there particular areas where start ups are failing?
Sansom: The biggest issue is cashflow – it can stop a business functioning. The business may be successful but if you can’t get the money in, money out stream correct, the business will grind to a halt. In terms of what people worry about, insurance actually comes quite far down the list – you’ve got regulation, employment law, tax – all the usual issues if you’re running a business.
BSME: And because the focus of a business is running that business, responsibilities like doing the accounts and so on tend to be done outside office hours – which makes having the option of buying products online more important
Sansom: From our point of view, we have all this online education, but if people still want to talk to us they can pick up the phone. So we have an advice team based in Glasgow who if at any part during the journey can be contacted by clients.
BSME: When it comes to the online offering, you have a very difficult balance to strike – the requirements of, say, a plumber, will be very different from those of someone who offers secretarial services?
Sansom: For the last 20 years or so, we’ve allowed businesses to pick from menu of the type of business that fits closest to what they do. So if you’re a plumber, you pick plumber. But our customers have been calling and saying, well I am a plumber, but my business also does a bit of this, and I don’t have any dealings in that. And that makes it more difficult to put people in a box. So to give people a better experience, we now allow people to describe their business much more fully, they can explain what they offer, whether they have assets, employees, where they work and so on. And that means your policy is a much better fit for you.
BSME: Do you feel that people broadly understand what they need before they come to you?
Sansom: Our online journey means we now have a significant amount of people who are confident about buying online. Those that do pick up the phone are usually looking for some comfort that they’ve got it right. There is a spectrum but what we have seen is that significantly more people are comfortable buying online.
Flood warnings and alerts in areas of the UK look set to continue as forecasts for a wet June follow a showery May and the wettest April since records began. With around five million people living in areas at risk of flooding, Barclays is urging businesses to check the Environment Agency’s website for future flood warnings to minimise disruption should they be affected.
Finding out where your gas, water and electricity mains are to make sure you can turn them off quickly, also keep important personal documents in sealed plastic bags and safe from areas floodwater can reach, are some of the steps that should be followed if the worse happens.
Kieran Murphy, managing director, Barclays Insurance, commented: “We have already seen some areas being hit by heavy rain and flooding, and it’s vital that people are prepared for an increase in severe weather incidents over the next few weeks.
“It is crucial that people check whether they live in a flood prone area and take all the necessary steps to be prepared should they be affected. While you cannot prevent floods from occurring, you can make sure you are covered for the damage caused to building and contents through your home insurance policy.”
The deal means that the AA is launching new products to add to its commercial range, including insurance for recovery operators, the taxi trade, motor traders and repairers and self drive hire companies.
Andrew Strong, the AA’s chief executive, points out that these motor industry products align well with the AA’s motoring pedigree.
“The AA is a household name for roadside assistance as well as motor insurance, including van and commercial vehicle cover. Adding specific motor trade insurance is a natural extension to the range and, in addition, forms a perfect fit with the AA’s fleet business breakdown cover.”
As part of the deal, Bollington is offering AA fleet cover to its own commercial customers.
Paul Moors, chairman of the Bollington Group said: “We have worked extremely hard to win this imaginative and creative relationship with the AA. We have over 40 years’ experience in the commercial broking sector and I believe that this is one of the most significant new ventures in the commercial market.
“Our broking experience, coupled with the AA’s marketing ability, is a perfect arrangement. It offers huge potential including development of new services created through AA’s financial services such as business credit card or fuel cards.”
Strong said that in the past, the AA has concentrated on distribution of commercial insurance through customers who buy other insurance products and, while that has been growing steadily, it represents a small part of the total business market: “There’s a greater need today for advice and tailoring products to suit individual requirements. Now we have that opportunity through our new relationship with Bollington – not just in the motor sector but amongst small businesses of every sort.”
Apart from the motor trade, the AA offers cover for pubs, restaurants, hotels and guest houses; small businesses such as traders, contractors, landlords, consultants and shop keepers; and van and small commercial vehicle fleet cover. Risks include buildings and contents, liability, employers’ and professional indemnity, tools and goods in transit.
NatWest and RBS will offer customers a range of solutions:
Fast-track requests for temporary credit increases provide short term financing to cover cost of repairs and replacement stock while businesses wait for insurance claims to be paid offer repayment holidays on existing loans to give businesses the breathing space they need to get back on their feet refund or waive overdraft fees incurred as a result of the riots on a case by case base basis. Other banks have announced similar schemes.
Meanwhile, businesses who have suffered damage as a result of the riots need to claim on their insurance quickly or they risk not being able to recover their losses, warns City law firm Reynolds Porter Chamberlain LLP (RPC).
RPC explains that most insurers require claims for riot damage to be notified within a very short period – typically seven days – otherwise the claim may be rejected.
This is because the insurer can make a claim in the policy holder’s name against the police to recover their losses under the Riots (Damages) Act 1886 (RDA). However, to do so that claim must normally be lodged within 14 days of the damage occurring.
Businesses that have suffered riot damage that do not have property insurance can also make a claim to recover their losses directly from the police under the RDA.
Stuart White, partner at RPC, comments: “Riots have caused millions of pounds worth of damage over the last few days. Businesses that have suffered riot damage should notify their insurer as soon as possible so as to avoid being left without insurance cover. Any delay is an unnecessary risk.”
“Some independent retail units have been completely destroyed by the rioters, making them dependent on recovering the value of the damage to start trading again.”
“The good news for some of the smaller retail units that have been damaged is that even if they do not have a property insurance policy they may be able to recover the value of any damage sustained because of the rioting directly from the police.”
“However the compensation under the RDA will not normally extend to the financial losses of the business while it is unable to trade. Trading losses are likely to be recoverable only by businesses with business interruption insurance.”
Stuart White adds: “Given the scale of these riots and the current pressure on police budgeting there will doubtless be calls to reform a law that compels police forces to compensate businesses and individuals for riot damage.”
“We will see whether insurers who cover police forces for the cost of RDA claims respond to these riots by pushing up the cost of their insurance.”