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Quarter Of SMEs 'Unknowingly Breaking The Law'

Lack Of Understanding Of Insurance Matters Among Smaller Companies


As many as a quarter (25%) of SMEs may be completely unaware that they are breaking the law, new research has found.

A survey of SME owners by Aviva found that a lack of understanding of legal obligations as an employer or business owner is leaving some SMEs in danger of breaking the law, particularly in regards to employers' liability insurance.

One in ten (11%) SMEs thought employer's liability insurance was not a legal requirement in any scenario, and a quarter (25%) thought it was only required once a business had more than one employee.

Almost nine out of ten (87%) SMEs were not aware that the minimum legal requirement for employer's liability insurance is £5m, while a fifth (19%) thought the minimum legal cover was less than £500,000.

Most shocking of all was the revelation that more than one in ten (12%) SMEs admitted to having no business insurance at all, rising to a quarter (25%) for those who had been in business for less than a year.

Angus Eaton, managing director of commercial lines at Aviva explained, "Clearly SMEs need a strong understanding of their legal obligations and how they can protect their business and employees to keep it trading – one claim without adequate cover could easily be enough to put severe financial pressure on an organisation or even close it down completely."

Expert Opinion
"This research has raised very worrying concerns regarding the number of small businesses which are seemingly unaware of key responsibilities in terms of obligations such as employer’s liability insurance.

"While starting up a new venture can be an exciting time, it is also fraught with difficulty. That is why we would always advise SMEs to seek support as they not only look to establish themselves but also try to get to grips with the challenges which come with growth.

"One of the most important things for small businesses to bear in mind is that they should not go it alone – they need to have the right support network to tackle all of the growing pains that they could go on to face."
Fergal Dowling, Partner

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