Only 64% of small business owners report that their insurance agent discussed risk management services with them, according to the 2019 Small Business Risk Report, a joint effort by Forbes Insights and The Hanover Insurance Group. That means approximately one-third of small businesses are not offered or made aware of important risk management services, some of which are included in their insurance policies.
Meanwhile, more than half of small business owners believe they are likely to face a claim in the next five years—which means it’s safe to assume they’re open to having a conversation about implementing risk management procedures that could reduce that likelihood.
The findings “represent a great opportunity for independent agents,” says Michael Keane, senior vice president, president of core commercial, The Hanover. “Discussing risk management services as a value-add to their policy is a great way to help demonstrate the value of their insurance to business owners and is a great way to help insureds mitigate risk.”
A majority 69% of small business owners report that multiple types of risk management services would be valuable to their businesses, according to the report. So why isn’t every insurance agent discussing these services with small business owners?
“Traditionally, the insurance industry has not focused heavily on the communication of risk management services available to small business owners to mitigate risk,” explains Christina Villena, vice president of risk solutions, The Hanover. Yet, “it’s important for small business owners to understand there are preventative measures that can be taken up front to help prevent losses. Some business owners may mistakenly believe it is difficult, expensive and requires a lot of effort, but there are many risk management tactics that are fairly simple and straightforward and can be easily implemented.”
For example, as many as 53% of small business owners believe employee safety training would be beneficial to reducing risks associated with employee injury, while 50% would value help with employee background checks to deal with employment practices-related risks. Additionally, 48% report that they need equipment theft prevention and recovery risk management strategies.
“Small business owners rely heavily on their employees, their equipment and their business property,” Keane says. “Fortunately, these three areas also represent some of the easiest, more economical tactics where you can implement some good, sound risk management.”
Additionally, “emerging trends such as cyber risk, reputational risk and liability trends are constantly changing,” Villena says. “Businesses are wise to understand these trends and work with independent agents to understand how they can impact their businesses, as well as how to protect against those risks.”
These types of risks are applicable to every industry, and agents can utilize a wide range of resources to educate their clients on how to mitigate them. Most carriers have “tailored solutions for small business owners,” which agents can access via “seminars, on-site consultation, webinars and online offerings,” Villena notes. “Trade associations are another resource that offer risk management information.”
Focusing on risk management enables agents to provide valuable counsel to help small business owners protect themselves. “Risk management really should be a part of the initial proposal for new clients and part of the conversation at renewal, as well,” Keane says. “This reinforces the value of the services that the independent agent can deliver to small businesses.”
While “having the proper insurance coverages and then understanding them is certainly important, it will not prevent losses,” Keane says. “We see the most successful independent agents working with leading carriers that have risk management experts, along with partnerships with third parties for value-add benefits, to provide small business owners access to comprehensive risk management services.”
Will Jones is IA assistant editor.