"Circumstances and financial situations change constantly, especially in business, so making this part and parcel of your business protection service offering is essential."
In today's dynamic business environment, safeguarding a company's interests is not just an option — it's a necessity. For those in the financial industry, the stakes are even higher. Financial institutions and their clients face a multitude of risks and when something happens to disrupt operations it can lead to significant financial loss. This is where business protection comes into play, acting as a crucial shield against unforeseen adversities.
Understanding business protection
Business protection refers to a suite of insurance policies and risk management strategies designed to secure a company’s financial health and operational continuity. These usually include key person insurance, shareholder protection, loan protection, and business interruption insurance. Each of these policies addresses specific vulnerabilities businesses may face. This safety net can prevent minor hiccups from becoming major crises.
The UK commercial insurance market was worth over £15.5 billion in 2023 – a 71.8% rise from 2021. Despite this figure, a surprising number of organisations choose not to opt for business insurance. In fact, according to research, more than half (51%) of small-to-medium enterprises (SMEs) have stopped buying one or more types of business insurance.
A survey from Allianz found nearly half (47%) of uninsured businesses consider their company too small to warrant an insurance policy. Additionally, 42% of respondents cited working from home as the main reason they’re uninsured, while around a third of people (34%) believed they didn't need insurance because no customers came to their premises.
The necessity of business protection for your customers
According to Vitality, there has been a rise in business protection over the last five years, so it’s a market that’s ready for support. From the economic climate, a rise in SMEs, and self-employed individuals, there are countless reasons why business protection should be a core part of your service offering. For one, highlighting the importance of business protection showcases your expertise and sets you apart from advisers who might not consider a client's holistic financial picture.
There are a variety of different policies to suit different businesses and their needs. Doing a full fact find to determine their specific needs is key, as some policies may not suit, or a package is more appropriate. Here's what's available to advise your clients on, and why they’re important:
1. Safeguarding financial stability
For businesses, the financial repercussions of losing a key individual or facing operational interruptions can be severe. However, research shows that 40% of businesses have no continuity plan, and only 18% have insurance to cover key people. Key person insurance ensures that a business can withstand financial shock if a pivotal employee or director becomes unable to work. This type of insurance can cover recruitment costs, loss of profits, and even training expenses for a replacement, maintaining the company’s financial stability.
2. Ensuring operational continuity
Business interruption insurance covers the loss of income that a business may suffer due to fire, flood, or other natural disasters. This ensures that the company can continue to pay its fixed costs and retain employees - a must given that fire/explosions account for the largest percentage (24%) of loss by value in the UK.
This type of insurance may cover damage caused to equipment and some policies cover costs if customers cannot get into the premises, which is particularly important for organisations that rely heavily on continuous operations and client trust. A significant interruption without adequate protection can result in a loss of business that might be difficult to recover from.
3. Protecting investments
Loan protection insurance is vital for businesses that have taken out significant loans. In the event of an unforeseen circumstance that affects the ability to repay the loan, this insurance ensures that repayments can continue, protecting both the business and the lender. This is crucial for maintaining long-term business viability and ensuring creditworthiness.
4. Securing business ownership
Shareholder protection insurance is essential for companies with multiple owners. In the event of a shareholder's death or critical illness, this insurance provides the remaining shareholders with the necessary funds to buy out the affected shareholder’s stake. This prevents external parties from acquiring an interest in the business, maintaining stability and control within the existing ownership structure.
The role of advisers
Advisers play a pivotal role in educating key stakeholders about the importance of business protection. By understanding the specific risks their clients face and tailoring protection solutions to meet these needs, we can help ensure that businesses remain resilient against potential threats. Moreover, we can provide invaluable guidance on the appropriate level of coverage, policy options, and the benefits of each type of business protection insurance for their needs.
Regular/ongoing reviews are also key to ensure continuous protection - not to mention, the quality of the advice being provided to your customers. Circumstances and financial situations change constantly, especially in business, so making this part and parcel of your business protection service offering is essential.
Ensuring a sustainable future
In today’s complex and often unpredictable economic climate, business protection is not just a safety measure - it’s a core part of a robust business strategy. It offers peace of mind, financial security, and operational continuity, ensuring that businesses can navigate challenges and thrive in the long term. As advisers, we have the opportunity to help support these important strategies with our customers and provide them with peace of mind that their business will continue to operate, irrespective of what comes their way.
By prioritising business protection, we can help companies build a resilient foundation that allows them to focus on their core activities, innovate, and achieve their strategic objectives, all without the constant fear of unforeseen disruptions. In the end, the importance of business protection cannot be overstated - it’s the bedrock upon which successful and sustainable organisations are built.
