Three out of four small businesses around the world are unnecessarily exposed to risk as a result of being underinsured, according to a report from specialist insurer Hiscox.

According to the firm’s Global Protection Gap Report, based on responses from 6,250 small business owners across the UK, USA, France, Germany, Spain and Portugal, 92% of business owners said they are kept up at night by possible threats to their business, with the top three insurable concerns being theft or damage to property (34%), cyber attacks (33%) and workplace issues and injuries (32%).

Despite awareness of the threats, 55% of SMEs may have a protection gap due to not purchasing core coverages such as professional indemnity, public liability, property and employers’ liability. This leaves small businesses exposed to potentially costly claims relating to bodily injury, property damage, lawsuits from clients and employee claims of mistreatment.

Around a third of small business owners surveyed have not reviewed their insurance policies in the last three years, meaning any growth in revenue, headcount, product offering or distribution during that time could leave them exposed to new or increased risk.

Hiscox warned that a lack of understanding among SMEs as to what business insurance protects them against is leaving too many businesses potentially vulnerable to avoidable financial and operational shocks. Professional indemnity is the most commonly misunderstood among small business owners, while cyber insurance is similarly misunderstood by SMEs, potentially leading to resilience blind spots for risks including data breaches, security failures, financial scams, or cyber attacks.

Joanne Musselle, group CUO at Hiscox, said: “As the business environment continues to evolve at pace, so too do the challenges that can impact the fundamental wellbeing of a small business. From cyber threats and supply chain disruption, to environmental events and shifting regulatory requirements, the landscape is shifting fast and it’s easy for it to feel overwhelming. The intention of this report is to help SMEs focus on some of those risks, and what they can do to minimise their exposure, and to help give them easier access to the resources that are out there to help and support them.”

“Of course, insurance has a role to play as a critical safety net, but it’s not a substitute for proactive risk management, and we want to do what we can to help make that process easier.”

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