The 2023 Hiscox Underinsurance in Small Business Report

The 2023 Hiscox Underinsurance in Small Business Report

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75% of small businesses in the US do not possess sufficient insurance coverage, leaving small business owners with potential financial liability for any claim over and above their insurance limit.

The 2023 Hiscox Underinsurance in Small Business Report reveals that most small businesses in the US are underinsured, leaving them vulnerable to potential claims and financial liability. Many business owners purchase a policy when they are just starting out, but do not appropriately update their policies as their business grows, allowing for the gap in coverage. The 2023 Hiscox Underinsurance in Small Business Report gauges US businesses’ protection against potential lawsuits and claims, as well as testing their understanding of insurance policies. This was achieved by surveying 1,000 small business owners with 1 to 50 employees.

Small businesses in the US are thriving, as 47% of those surveyed have experienced a revenue increase since 2021.  

Only 32% have had a decrease in revenue. But what does it mean for those businesses with a revenue increase? With the expansion of their business, they may now be underinsured, leaving a possibility of exposure to claims above their insurance limit. On the other hand, those businesses observing a revenue decrease may possess an excess of coverage, making them pay more than needed.

Breaking down insurance policies  

What is General Liability (GL)? 

This is the foundational coverage that nearly every business, no matter how small, should have. Without a GL policy, more than one-third of all small business owners surveyed are unprotected against claims of bodily injury, property damage, and other common claims. Of the US small businesses who have been operating for ten years or more, 39% have never updated their General Liability insurance, meaning their business is highly likely to have outgrown their insurance.

What is Property insurance? 

This policy protects things like business property, including tools and equipment. Less than half (45%) of businesses had Property insurance.

What is Worker’s Compensation insurance? 

Only 35% of businesses surveyed had Worker’s Compensation insurance, which is mandated in nearly every state. It covers the costs associated with work-related accident or illness such as an employee becomes ill, is injured, or even dies on the job. It can cover medical costs and lost wages. 

What is Professional Liability (PL)? 

This protects businesses that provide professional advice to clients. Over two thirds of the businesses surveyed failed to obtain a PL policy, making them unprotected against the financial implications of a lawsuit for negligence.

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Buying business insurance is often seen as a checkbox exercise and a one size fits and covers all purchase. This is a potentially catastrophic mistake and could spell the end for a business. Change happens to the best of us, and like a favorite t-shirt, it’s unlikely business insurance is going to fit after a few years. Owners should always let their insurance agent know if their business has grown or changed. Just like a business, insurance should never be stagnant.

Kevin Kerridge

Chief Executive Officer, Hiscox USA

Insurance can be tricky to understand and it proves to be a mystery to most small business owners in the US.  

The Hiscox survey revealed that most small business owners do not know what basic insurance policies cover, with 71% not understanding what a Business Owners Policy (BOP) covers, and 83% failing to correctly describe a General Liability (GL) policy’s coverage.

There are so many educational resources and tools out there to help best understand coverage options and protect your business. This includes insurance carriers and their resource centers, as well as insurance brokers and agents. 56% of small business owners also find agents and brokers to be the most helpful source of information.

The first step toward making sure your business is well protected is to learn about business insurance and how it can help.  Hiscox’s Business Insurance 101 resource center is a great place to start. Along with explanations of each type of insurance your business may need, you’ll find questions small business owners often ask. Since insurance terminology can seem confusing, you’ll find some common terms and their definitions in the Hiscox Insurance Glossary. The Hiscox blog includes comprehensive information on how to start, grow and protect your business, as well as inspirational stories of how we at Hiscox encourage courage. 

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The content is provided for general information purposes and is not intended to and does not constitute business or legal advice to any particular person or entity.