The report, based on a survey of 819 small business owners in January this year, found that 16% of respondents experienced a premium increase of more than 25% in the past 12 months, while around one quarter (24%) said it caused them to evaluate and/or cut spending.
More than half (52%) of SMEs that reported an increase in premium costs said the increase was 11% or more, while some sole proprietorships saw cost increases “well above that – in particular following a complaint,” according to the report.
Just over one in ten SMEs (11%) said they had made an insurance claim in the past 12 months.
Specifically in the area of protection, only about one in 10 (11%) small business owners said they currently have a revenue protection policy in place for their business.
As inflation hits its highest level in 40 years, small businesses across the UK are coming under increasing pressure due to the economic downturn caused by the Covid-19 pandemic.
On a range of insurance products, 30% of small business owners told the FSB they struggled to understand and 13% said their coverage had been reduced.
Commenting on the report’s findings, FSB National Chairman Martin McTague said: “Cover for perils of all kinds – from fire to flood to less tangible perils – is vital to the continued ability of small businesses to trade, but our report indicates that there are issues lurking beneath the surface that, if left unaddressed, could still hinder small businesses’ ability to compete on a level playing field.
“Rising hedging prices leave businesses stuck between a rock and a hard place, forced to pass higher costs onto customers, or cut back on investment and expansion – or even risk opting for a level lower cover, which can leave them painfully exposed if the worst should happen.”
The FSB issued a series of recommendations on the bank from its findings to regulators, insurers and government on “how to solve or improve” the insurance challenges facing SMEs, including urging that the Financial Conduct Authority be “explicitly required to consider intervening in a market if there is found to be a segment/sector of businesses which are unable to obtain insurance.”
“Our recommendations, taken together, will help make access to insurance easier and more profitable for small businesses, allowing them to be confident that by paying a premium they will in return get a premium product, tailored to the unique needs of their business,” added McTague.