Key person risks are critical for many UK small businesses
- Published: Wednesday, 21 August 2019 09:35
More than a quarter (26 percent) of small businesses in the UK would have to immediately close if a key person died or became critically ill, according to research by Legal & General into the business protection market. A further 26 percent of companies said they would cease trading within a year in these circumstances. Legal & General’s State of Nation’s SMEs survey also found that 15 percent of businesses which had already suffered such an event had shut their doors. A key person is someone whose illness or death would directly cause a financial issue for a business, such as a fall in revenue, loss of clients or even a loss of efficiencies. Nearly two-thirds (63 percent) of the businesses Legal & General surveyed said they had more than one key person.
Across the more than 700 small companies surveyed, losing a key person was ranked as the number one concern. Of those SMEs which had already suffered from such an event, nearly a third (30 percent) said that a business owner or important employee dying or becoming critically ill had impacted their profits. Almost one in five (19 percent) said it had lost them the confidence of their customers.
However, though these businesses were aware of the potential effects of losing a key employee, 70 percent said that they had either never considered, or did not understand the need for business protection. In fact, just under half (48 percent) of those surveyed said they didn’t have cover in place for any of the key risks of key person, debt or share protection.
The research presents a clear opportunity for intermediaries to kickstart conversations with SME clients about business protection. Almost two-thirds of small business owners (63 percent) said they would be happy to be contacted by an adviser about this type of insurance.