Many SME employers are largely unaware of the business protection market but adviser partnerships with accountants are key to closing that gap and growing the sector.
A new report from Scottish Widows found significant ignorance about business protection among SMEs.
This was particularly alarming given the precarious nature of operations and reliance on certain individuals for many of these firms, the insurer noted.
It has also published a separate guide to help business owners understand and identify how and where their own business may be exposed.
Its survey of the 2,019 UK businesses ranging from first year of trading to £1m turnover found half (48%) had never heard of executive income protection, and 40% were unaware of relevant life insurance.
A similar percentage (38%) had not heard of business life insurance, while 24% said the same about business critical illness insurance.
However, the research indicated accountants could be key to helping advisers close this awareness gap.
While only 19% of the surveyed business owners used a financial adviser, 70% used an accountant.
This illustrates that “many accountants have the ear of SMEs but not many adviser’s, which reinforces the value of partnering with accountants,” Scottish Widows said.
It added: “Business protection rarely sits in one professional lane. The strongest outcomes often come when advisers, accountants and solicitors each play their part.
“One may spot pressure in the accounts. Another may be drafting a shareholder agreement. Another may be helping the client understand how risk could be funded.
“When those conversations join up, clients are more likely to get a plan that is practical, legally sound and financially workable.”
Unable to keep trading
The importance of taking out cover was underlined by nearly a quarter (23%) of SMEs surveyed admitting they would only be able to continue trading for a maximum of one month if they lost a key person within their business.
Furthermore, one in 10 firms would cease trading immediately if the business owner became incapacitated due to illness.
And 58% of owners would be concerned about loss of income if they were unable to work due to serious illness or injury.
Despite this, the report found awareness and uptake of business protection has remained low.
Nearly half (45%) of SME owners surveyed said they had never sought advice about business protection, while 94% acknowledged their business relied on more than one key person.
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Already having conversations
Catherine Trimble, head of distribution, protection at Scottish Widows, (pictured) said: “Business protection is often seen as specialist or unknown territory. In reality, the opportunity is much closer to home.
“Advisers are already having the conversations that lead to business protection. Clients talk about debt, succession, reliance on key individuals, pressure on cashflow and uncertainty about what would happen if something changed unexpectedly.
“The need is there. It simply does not arrive labelled as business protection.
“At the same time, most small businesses remain under-protected.
“Many rely on a small number of people to generate income, service debt, and drive growth. Yet a significant proportion have never taken advice, do not fully understand their options, or have no funded plan in place.“
New guide
In a bid to help raise awareness of the potential risks businesses may be carrying and how business protection can help mitigate them, Trimble added the insurer’s report for financial advisers highlighting the key issues from an advice perspective.
And she noted the separate guide for business owners about how and where their own business may be exposed.
“Our research suggests many business owners may not fully understand where they’re exposed or what support is available,” she continued.
“That’s why we’ve developed this guide – to help business owners recognise potential risks and give advisers a practical starting point for conversations that can otherwise be difficult to begin.
“Wealth planners, workplace specialists and individual protection advisers don’t need every technical answer from the outset.
“The important first step is helping their business clients identify where vulnerabilities exist and then exploring the options available to strengthen their business resilience.”
