Small Business Gap

There appears to be a large gap between small business owners’ biggest stressors in 2023 and what they’re prepared for when it comes to their insurance knowledge and coverage. That’s according to data released from NEXT Insurance which surveyed more than 500 small business owners across the United States.

Insurance is often a blind spot for small business owners, the survey revealed, as 90% of respondents noted they lack confidence that their businesses are adequately insured. Also, 96% of respondents did not achieve a grade of 70% or higher in a general insurance knowledge test. Yet, only a third reported seeking professional help for their insurance needs. None of the 500 respondents got a perfect “test” score, indicating that many still need the proper support to navigate the industry.

According to NEXT, 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.

Key survey findings include:

• 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. Surveyed small business owners also indicated 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.
• 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 potentialrisks, but 18% of all respondents are not taking or do not plan to take any steps in the next six months to better protect their business.
• 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.
• 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%). Female small business owners are facing a more challenging insurance journey than their male counterparts: Women are more likely to see their knowledge of coverage and policy needs 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%).

NEXT 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.