Business insurance – does size matter?
Here in the UK, it is difficult to get comprehensive statistics on the number of “live” businesses. The problem we face is how you actually define a business? On the face of it, this may seem very simple, but the various government agencies are faced with problems counting businesses because you do not need to declare every type of venture.
At Businessinsure, we have to categorise customers for statistical purposes to the Financial Services Authority. Effectively, these are commercial (business), retail (non-business) or mixed (a bit of both). The FSA cannot count up every single risk that is commercial and say there are x number of businesses, because there are serious issues with duplication of data and customers placing insurances with a number of brokers.
We categorise every customer that earns income (whether a profit is made or not) as a business. Charities, are treated as commercial because many of them earn income but choose to re-distribute to the local community. A sole trader selling goods on ebay part time is essentially a business, they are generating profits and bringing money back into the business community. Additionally, if someone has a property which they rent out they are earning income on that property. It may not be enough to cover the mortgage but we still consider that as a business.
There are different categories that the business community have created from micro, macro and small to medium enterprises all the way to PLC’s. Limited companies are the most common form of business and numbers can be obtained fairly easily from Companies House records. But, these do not tell you the size of each business.
This leads us to how UK commercial insurance companies treat different businesses and whether they have different categories. There is good and bad news on this front. The good news is that every single insurer, through their historical statistics, will have different policies for different types of trades. The bad news is, that they do not follow similar category styles. So, size does matter because ABC Insurance may only offer a small business insurance quote (with much lower premiums) and their nearest competitors, XYZ, will offer different levels of quotes for micro, small, medium and large companies.
Smaller businesses, usually sole traders, should get reduced premiums because they offer reduced risks. But, insurers usually have minimum premiums around the £250 level and upwards. If you have the time, it is best to speak to more than one business insurance broker to see what options they can provide you. The only thing to bear in mind is that as your business grows (fingers crossed!) you need to make sure you policy takes account of increased turnover, stock and other business activities.