Findings from a recent NEXT Insurance survey highlight a significant gap between small business owners’ biggest stressors in 2023 and what they’re prepared for when it comes to their insurance knowledge and coverage.
The data’s overarching takeaway: Insurance is often a blind spot for small business owners.
Total, 90% of the 500 small business owners surveyed across the U.S. lack confidence that their businesses are adequately insured. More than half of participants listed making a professional mistake as a top potential risk with the power to negatively impact their business this year.
Also, 96% of survey respondents did not achieve a grade of 70% or higher in a general insurance knowledge test. Only a third reported seeking professional help when it comes to their insurance needs. At the same time, however, 82% are taking steps to better protect their business – like reviewing their coverage or conducting a risk assessment.
According to a NEXT press release, small businesses are often a bellwether for the greater American and global economies. When small businesses begin to feel pressured by inflation, supply chain woes, staffing shortages and more, it signals broader challenges ahead.
NEXT uses artificial intelligence and machine learning to issue small business insurance policies. The company conducted its survey in early 2023 to understand what challenges are top of mind for small business owners, how prepared they feel for challenges from an insurance perspective and to test their knowledge of general liability insurance.
Key findings are detailed below.
Small business owners are sweating the small stuff (and the big stuff)
More than half of the respondents (51%) listed making a professional mistake — anything from workplace accidents or HR issues to clerical errors — as a top potential risk with the power to negatively impact their business this year. Surveyed small business owners were also aligned on their top stressors for the coming year: 68% are most concerned about inflation, followed by reduced consumer spending, a potential recession and supply chain issues.
Most small businesses are underprepared and underinsured (and some are fine with it)
Despite 90% of small businesses lacking confidence that they’re adequately insured against their most worrisome risks, more than a quarter of respondents (29%) don’t have any business insurance coverage at all. More than half of those surveyed (51%) say their business is less than “very prepared” to face potential risks, but 18% of all respondents are not taking or do not plan to take any steps in the next 6 months to better protect their business.
Insurance rivals taxes as a small business knowledge gap
For many small business owners, understanding the complex landscape of insurance can be tricky. More than half of survey respondents (53%) said their greatest barrier to obtaining insurance comes down to knowing what coverage and policies their business needs. Despite not knowing where to start, just one third will seek professional help (despite their significant concern of making a professional mistake — many of which might potentially be covered with the right insurance). When quizzed on general liability insurance specifics, 96% of respondents did not receive a passing grade (70% or higher). None of the 500 respondents got a perfect score, indicating that many still need the proper support to navigate the industry.
Not all small business owners are the same, so insurance must be tailored
Survey respondents included men and women; spanned cities, rural areas, and suburbs; and accounted for entrepreneurs of all generations, identifying differences that indicate just how varied small business owners are —and how their insurance needs (and knowledge) vary. Rural business owners are more concerned about inflation than their counterparts in the suburbs (71% versus 64%). Cyberattacks or data breaches keep small business owners over 45 years old up at night compared to those under 45 (41% versus 30%). And female small business owners are facing a more challenging insurance journey than their male counterparts: Women are more likely to feel their knowledge of coverage and policy needs for their business as a barrier to getting insurance compared to men (60% of women compared to 50% of men). Women are also more likely to not have insurance (35%) compared to men (25%).
Read more about the survey findings on the NEXT blog.
“Small business owners today have to wear a number of hats and often feel pressured to be experts in everything from taxes and insurance to finance and HR. This is an unrealistic expectation, and thankfully there are many resources designed specifically to support small businesses with the guidance, education and tools needed to tackle some of the most common challenges they face,” said Alon Shiran, VP of Product at NEXT.
He continued: “Insurance can be a daunting part of running a business, especially because without proper coverage, businesses can endure significant financial losses that could make or break their bottom line. Our goal at NEXT is to eliminate that burden with a simplified digital purchasing experience, embedded offerings through partners, customizable policies, accessible resources, and deep expertise so that small business owners can focus on what matters most – running their business.”
Topics Trends Commercial Lines Business Insurance
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