In thirty years, an entire economy can change. China is a spectacular example of this case in point; between 1990 and 2020 China’s economy expanded at an average rate of 9.12%.
In the UK, the economy itself has grown at a more modest pace, but the nature of our industry and the way our businesses work have undergone a similar revolution.
In 1990, a typical new business looked like a shop that perhaps sold imported products via cash transactions.
Jump forward to 2022 and a new business might look like a string of ones and zeros. It could be a purely online business that sells a digital (possibly automated) service via a recurring electronic payment subscription.
The digitisation of business has meant that it’s been easier than ever to start your own because a business model (such as a domain name, website template and shopping cart functionality) can be bought at a low incremental cost. Open-source options for the above might even be free.
What hasn’t changed is the need for businesses to arm themselves with the right insurance policy to protect themselves against unexpected costs.
Let’s take a look at what has changed in the insurance market for business policies over the last three decades:
The UK has become more litigious
The UK has taken a step in the direction of the US with regards to how litigious its citizens have become. The Royal Economic Society reveals that 3.3 tort suits are filed in the United States for every 1,000 inhabitants compared with only 1.2 per 1,000 in England. A tort suit is a civil case where the claimant typically seeks damages for a financial loss suffered that was caused by the defendant.
These regional differences hide the fact that the 1.2 per 1,000 rates is still an increase from 1990. That’s in part because of the rise of claim management firms and ‘no-win, no-fee’ lawyers, which have reduced the barrier to entry when making a claim. No longer does a potential claimant need to stake and risk their own cash to begin a claim. Instead, they can consult without charge and only pay their advisers if a cash settlement is awarded.
This has incentivised many individuals to bring claims against businesses that may have otherwise kept their claims to themselves. Businesses need insurance that will cover them against the legal costs they will incur to defend each claim, as legal fees quickly mount.
The rise of online insurance brokers
Online marketplaces have grown over the last 30 years to cater for consumers of every conceivable financial product and business insurance is no exception.
Even without the internet, businesses would ‘compare the market’ via an insurance broker who would collect insurance quotes on their behalf and put forward the best policies to their client.
In the modern world, human insurance brokers still exist, but they’ve moved online. Websites such as Gallagher business insurance brokers have opened their doors to smaller and smaller businesses each year because being online has automated much of the quote retrieval process, allowing brokers to efficiently serve small businesses.
As the UK’s service economy has developed, business insurance has specialised to meet the needs of different industries. Consider the following policy options now available:
- Alternative therapist insurance
- Tour operator insurance
- Dance class instructor insurance
Each of these policies will be tailored to cover the risks inherent to each profession. By including generous provision for these real risks and minimising cover for unlikely or ‘not applicable’ risks, the policies can offer less but more useful coverage, resulting in lower costs.