While the primary goal of an entrepreneur is to make profits, businesses run into challenges such as fire accidents that threaten their sustainability. In that case, the business requires a backup plan to continue operations. This is where insurance comes in handy. Most small businesses do not have insurance despite the inherent risk of investing. According to mckinsey.com, 40% of American sole proprietors do not have a small commercial coverage. This means business insurance is relatively uncommon compared to car insurance. In other words, a substantial number of businesses do not have insurance to cover losses in case of accidents or lawsuits. McKinsey reports that 94% of insured small businesses renew their insurance with incumbent carriers. They make their insurance purchase decisions in a “loyalty loop.” Therefore, insurance companies make better returns on retention than on acquisitions.
Why many businesses are not insured
This worrying statistic begs the question; why is the uptake of business insurance policies low? One of the main reasons many businesses do not have insurance coverage is they prefer settling the problems themselves. For instance, if a burglary occurs, the business replaces the product rather than following up with the insurance. Also, the cumulative cost of premiums can exceed one-off payments for damages. In addition, going through bureaucracies of making the claims is not worth the hustle. This means a business might not pursue a claim when genuine to avoid increasing the premiums.
The Importance of Insurance to Business
But the risk of not taking insurance can outweigh the cost of policy premiums. Therefore, it is imperative that business people understand why it’s essential to have insurance coverage. Lack of insurance makes businesses and consumers vulnerable. For instance, they can risk getting stuck with damaged items. This problem takes a toll on business performance because it erodes the trust between the business and customers.
The Way Forward
You will agree that there is a gap in the business insurance space. Luckily, there are several solutions to this problem. First, insurance coverage providers should tailor policies that address the business needs of specific industries. In addition, the insurance provider should devise a fast digital process that expedites the application process. According to survey, 49% of the applicants want their policy processed the same day, while 74% want the insurance coverage within a week. Manual processes can’t accommodate these demands. With technological advancements in the digital world, insurance solutions should be easily accessible, reasonably priced, and designed according to consumer-specific needs.