Start-up insurance should be considered as “essential from day one”, says study

Just four in 10 businesses operate with insurance in their first three years of trading, a new study has revealed.

AXA, which published the research, suggested that Britain’s two million self-employed entrepreneurs are taking huge risks when it comes to insurance.

Some 60 per cent of start-ups founded in the last three years operate without the appropriate insurance, it found, with that number decreasing to 40 per cent for businesses in their fourth year.

Worryingly, just 41 per cent of start-ups had taken out employers’ liability insurance, which covers workplace injuries and illness.

In the UK, this type of insurance is a legal requirement and businesses leave themselves vulnerable to serious penalties in the event of an accident.

Some 72 per cent of business owners said their organisation was “too small” to need it, while 25 per cent hadn’t even considered insurance.

Unexpectedly, the least common reason for not taking out insurance was price, with just eight per cent of start-ups saying it was too expensive.

A further three per cent said they had forgotten to renew.

Gareth Howell, managing director, AXA Direct, said: “The key finding of this survey is that people are operating businesses without insurance because they think they are ‘too small’ or ‘too young’ for risk.

“We see no evidence in our claims figures that this is the case: we regularly settle injury claims on behalf of microbusinesses that top the million pound mark. That isn’t unusual these days at all, and the amounts claimed in compensation are likely to increase following the government’s change to the Ogden Rate in March of this year.

“Added to that is a significant rise in property damage claims too, as the value of fixtures, fittings and floorings is going up in British properties across the board.”

“We anticipate that claims against small firms will increase in value, and they are affecting a wider spectrum of occupations than ever before. Compensation culture has played its role here. Having a greater proportion of young businesses in the economy also contributes, as they can be less prepared for pitfalls and mistakes than firms that have been around longer. Insurance should be considered an essential piece of financial protection from Day One,” added Mr Howell.