Small business owners are being locked out of the insurance market, with one in three not insured against the biggest risks to their businesses.

Research shared with Retail Express by SME Insurance found that 34% of small and medium firms had insufficient insurance against risks including crime and flooding.

Jonathan Webber, commercial director for SME Insurance, said retailers are being put in a vulnerable position. 

“The lack of insurance protection among small businesses could potentially be catastrophic to their businesses,” he added.

The research was followed by a call from the Environment, Food and Rural Affairs Committee for Government intervention on unaffordable insurance.

The committee proposed a review into a Government-backed insurance scheme for small businesses, after being told by 85% of insurance brokers that it had become increasingly difficult to provide business flood insurance in recent years.

Farida Rajwani of Garratt Lane News in Tooting, south London, said insurance adds a huge cost burden to her business. 

“It’s unaffordable,” she said. “All of the costs retailers have to pay are far too expensive and footfall is declining.”

Sharon Walker, owner of Sandylands Spar in Kendal, Lancashire, was forced to close her store for six months after last year’s floods and went through a “horrendous” insurance claim process, with insurers yet to pay for lost earnings almost a year on.

“More definitely needs to be done,” she said. “Insurers are starting to say they’re not going to cover small businesses against flooding, and some are introducing premiums to insure the excess – it’s wrong.”

Retailers heavily affected by crime are also struggling to get adequate cover. Reg Bell, who owns four stores in Kent, said he had lost “thousands and thousands of pounds” to criminal damage, but claiming on his insurance wasn’t worth it because of excess costs. 

“We shouldn’t have to make an enormous effort to cover the damage caused by criminals,” Bell said. “Retailers should automatically get compensation orders against the people who cause us a loss.”

The Federation of Small Businesses called on insurers to ensure small firms were no longer locked out of the market.

“A Government grant scheme would go part of the way, but ultimately, the insurance industry needs to find a way to provide affordable cover to those who need it most,” said national chairman Mike Cherry.

The five biggest risks to small businesses:

1. Crime, such as thefts and break-ins
2. Climate, such as flooding
3. Public liability, such as in-store accidents involving shoppers
4. New technology threats, such as computer hacking
5. Power shortages, affecting equipment such as refrigeration

Source: SME Insurance