How small business owners can minimise the risk of liability claims
- 19 Sep 2023
- Markel Direct
In the increasingly litigious era in which we live, the volume of insurance claims across both business and personal lines remains high. Some of which are genuine claims, others are simply opportunists trying to game the system and make quick cash.
Regardless of this, as a small business owner you need to have heightened awareness of the daily risks you face.
In this article, we look at why it is vital to show diligence in how you can minimise the risk of claims being made against you, and how you can protect your business in the event of a claim.
What is the impact of rising insurance claims?
The frequency and severity of insurance claims becomes the catalyst for the rise in insurance premiums. When insurers receive a surge of claims, it directly affects the amount you, the consumer, will pay for your insurance protection.
According to data published by the Compensation Recovery Unit (CRU), claims settled in the last 10 years peaked in 2013/14 (1,049,017 claims settled) and while they have halved since then (542,457 claims settled in 2022/23), the average settlement value in the past decade has risen by 46.5% (1).
Increasing insurance claims affects all of us. For example, insurers may charge £1,000 for motor insurance, but claims based on an accident can cost thousands in compensation. As such, the more claims that are received the more an insurer is likely to charge for cover. If for no other reason, premiums are increased to ensure the insurer has enough cash reserves to cover the volume of claims being received and settled.
In more recent times, the rise in inflation has seen the cost of rectifying an issue as part of a claim rise. In the motor industry, the rising costs of labour and vehicle parts has meant that claims values have risen. A situation like this will inevitably mean that the insurance premiums must rise to meet the increased costs.
Example claims against small businesses
Customer injury or damage to a client's property
If a client has an accident on your premises, this can cause them to a claim against your business, especially if the injury restricts them form working and earning.
The same can be said if you are a freelancer who works on-site at a client's premises and you accidentally damage the client’s property, for example, you could spill a drink onto a computer.
Public liability insurance will respond to cover you in this scenario.
Employee injury or work-related illness
Employers are responsible for the health and safety of their employees while they are at work.
Your staff could suffer an injury or a disease because of working for you, or your former employees may contract a disease such as a respiratory compliant because of work they undertook while in your employment.
Employers’ liability insurance will cover the cost of defending a claim, and any compensation awarded to the claimant, against you from an employee who has suffered and injury or illness because of the work they do for you.
Fire damage can happen at any time and in any industry, with some industries at greater risk than others.
Regardless of the industry you work in, to protect your business you will need a commercial property insurance policy in place to make a claim if you have a fire at your business premises.
Reputational damage refers to an incident where your business causes another business to lose face, or where a negative incident affects the reputation of your own business.
These types of claims can be the costliest, especially in high profile cases.
Professional indemnity insurance will respond to provide cover in the event of a claim against you for damage to someone's reputation.
Slips, trips, and falls
Claims from slips, trips, and falls from customers are common and can arise from exposed cables, upturned carpet, and poorly maintained steps.
If a customer has an accident on your premises, they could be entitled to claim compensation depending on the severity of their injuries.
Holding public liability insurance is important as you deal with customers, but good housekeeping is essential to reducing the chance of claims arising in the first place.
The role risk management plays in protecting businesses
In the modern world of digital technology risks evolve quickly. This means companies are required to keep up to date to ensure their risks are documented and managed effectively. Risk management analyses, understands, and addresses risk to ensure organisations achieve their objectives and mitigate accidents and claims.
Five key reasons why risk management is important for organisations of all sizes:
- Risk planning enables a business to identify risks early and reduce them or even eradicate them completely.
- The process can help to protect a company’s resources.
- Risk management helps to protect a company’s staff by identifying risks and ensuring the company has the correct safety procedures and adequate insurance in place.
- Risk planning is financially shrewd as it can help to reduce insurance premiums through the recommendations for enhanced safety procedures. This in-turn can also reassure lenders when a business applies for extended credit and business loans.
- Risk planning helps businesses to prepare for the unexpected. It ensures all relevant company information, and the process of disaster recovery is in place, which can make the insurance claim process smoother.
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