L&G: 40% of SMEs would cease within a year of losing key employee

clock

Legal & General has revealed that 40% of small businesses would cease trading within a year of losing a key employee or owner yet 60% do not have business protection in place.

The insurer's 2015 State of the Nation's SMEs report found that 72% of SME business owners have not taken out business protection because they did not see the need for it or were unaware of the risks involved.

Just 28% of business owners had heard of a relevant life plan, the survey highlighted, but 62% were receptive to the product after it had been explained to them.

However, 90% of the business owners surveyed said they would like to speak to a financial adviser about business protection, after having the product explained to them. However, less than half of those businesses had a financial adviser.

Of the businesses that did have a business protection policy, 89% took out the policy because they had it recommended by a financial adviser, not through personal awareness.

The average UK SME is worth £3.1m and generates a profit of £620,000, L&G's research found. SMEs employ 24.3m or 81.6% of the UK workforce.

The majority (98%) of SMEs have less than ten employees. Meanwhile, the average small business owner is a 48 year old male who has been trading for 12 years. However, L&G found that newer businesses, established within the last 2 years, were more likely to be led by younger and female owners.

Richard Kateley, head of specialist protection of L&G said that there was a key opportunity for advisers to discuss business protection with clients when discussing the auto-enrolment proposition. He highlighted securing against the loss of a key staff member should underpin many small entire businesses.

He said: "Business owners are very good at planning what would happen if they faced an IT failure or security breach yet often overlook financially protecting the business through a lack of awareness or education."

He added: "There is a real need for advisers to guide their clients through the products available and make sure they are prepared for whatever the future may hold to protect the business, their staff and families."

More on Income Protection

Monica Garcia: Let's keep the income protection conversation going

Monica Garcia: Let's keep the income protection conversation going

"There were so many significant changes and she simply felt overwhelmed"

Monica Garcia
clock 04 July 2022 • 6 min read
The COVER Review June 2022: Pride, Sandy's Story, Consumer Duty and IP for Gen Z

The COVER Review June 2022: Pride, Sandy's Story, Consumer Duty and IP for Gen Z

Now available for members to watch

John Brazier
clock 23 June 2022 • 1 min read
LV= pays out over £5 million on IP claims during early 2022

LV= pays out over £5 million on IP claims during early 2022

Between January and April

John Brazier
clock 14 June 2022 • 1 min read

Highlights

FCA gives three-month Consumer Duty extension for advisers

FCA gives three-month Consumer Duty extension for advisers

Deadline of 31 July 2023

Hemma Visavadia
clock 27 July 2022 • 5 min read
Meet the firm turning professional athletes into protection advisers

Meet the firm turning professional athletes into protection advisers

"You're only ever as good as your last game, but your next game could be your last"

Hemma Visavadia
clock 25 July 2022 • 5 min read
The COVER Review July 2022: Protection & Financial Education, IPAW 2022 and Reviewing 2022 So Far

The COVER Review July 2022: Protection & Financial Education, IPAW 2022 and Reviewing 2022 So Far

Now available for members to watch

John Brazier
clock 20 July 2022 • 1 min read