This post is part of Acuity’s Master Class Series, dedicated to shedding light on financial and other influential industry topics. Our goal is to provide a deeper understanding to the business community to empower their strategic decisions. We sat down with Phillip Naples and Andrew Egenes, CEO and CTO of Unbrokerage respectively, to discuss small business insurance and how small business owners can navigate the insurance landscape.
Is your small business protected from unforeseen dangers and disasters? If not, you’re at risk for massive financial implications. According to the U.S. Chamber of Commerce, legal issues cost US small businesses over $100 billion each year. And, according to the National Federation for Independent Business, businesses pay $35.6 billion out of pocket to settle claims each year.
Business insurance is a critical component of successful small business ownership, and is one of the regulations small and large business are held to alike. Yet insurance often falls on the priority back burner thanks to information overload and cash flow roadblocks. Most small business owners are looking to purchase coverage as soon as they can, but are lacking an easy avenue to get it and a method to pay for it. That’s why Unbrokerage created a platform to allow business owners to take back control over the way they purchase and manage their liability insurance.
Here’s a summary of our conversation with Unbrokerage including actionable tips on how to navigate the small business insurance ecosystem:
Small Business Insurance Lightning Round Questions:
Q: What are a few major problems small business owners pursuing insurance face today?
I think it can be boiled down to three things. First and foremost, most insurance companies don’t allow business owners to pay with a credit card and require an upfront premium payment. Considering the fact that 82% of businesses fail due to cash flow problems, that represents a major roadblock for small businesses owners pursuing coverage. The second major issue is a lack of understanding of the types of insurance they need or don’t need. And finally, the process of pursuing small business insurance is a notorious headache with mounds of paperwork. Most small business owners don’t have the time it takes to become an expert and make an informed decision.
Q: Why do you think most small businesses hold off on purchasing insurance?
If you Google “small business insurance” right now, you’ll understand. There’s so much misinformation on the subject. Business owners become confused and end up pushing the decision to the backburner. Even those who do their research may quickly realize that they don’t have the cashflow to cover a one year premium payment up front.
Q: When is the right time to consider insurance for your startup or small business?
There are three main qualifiers that typically require insurance: 1) signing a lease agreement 2) hiring an employee 3) signing a contract with a customer. If small business owners are looking to protect their personal assets early on, insurance is a must. On a more practical level, most often businesses can’t execute a contract with a new customer until insurance coverage is in place. The traditional process takes four to twelve weeks on average and can cause businesses to miss out on revenue.
Q: What are some of the most common misconceptions surrounding small business insurance?
In our opinion, there are four major misconceptions we see come up again and again for small business owners: 1) Thinking a small business isn’t worth that much – that if a claim comes up down the road, they’d be able to fold up the entity and start fresh. The problem, of course, is that all of the assets you’ve personally pumped into the organization aren’t protected. 2) Assuming homeowners insurance will cover liability when working out of your home. 3) Assuming personal auto insurance has you covered when driving your personal car for business. 4) Assuming they can’t afford it and that the application process will take too much time.
Q: What type of insurance should business owners prioritize?
This completely depends on the type of business you are running and your specific risks. If you have at least three employees and/or contractors working on your behalf (including yourself as a business owner) you’re required to have workers’ compensation insurance. General liability insurance covers any tangible products you sell while professional liability insurance is ideal for service based businesses seeking coverage for the actions of delivering that service. Property and auto liability are also potentially critical to consider.
Q: What is something companies should not overlook when obtaining coverage?
The ability to make changes to their plan. Although many brokers discourage business owners from creating extra work for them by making changes to their insurance coverage. Small business insurance should be scalable. Traditional brokers sell coverage by convincing business owners what coverage they’ll need based on what the company will one day become. Business owners deserve coverage for where they are TODAY and that insurance should be capable of growing with your business. Having the flexibility to change your plan throughout the year is especially important for technology businesses with major growth goals.
Q: What mistake do most small business owners make when pursuing insurance?
A lot of business owners are too caught up in price and are only searching for coverage that’s the absolute cheapest. While this may sound appealing, those who choose this route quickly realize that they’ve secured coverage from a lower rated carrier that probably won’t pay a claim when you need it. As difficult as it is, avoid purchasing insurance purely based on price and make sure you understand what you’re getting and who you’re getting it from.
Q: Why did Unbrokerage get in the business of helping small business owners with this pursuit?
Small businesses are the lifeblood of our economy. If we can take this one business process off the small business owner’s desk and make it very simple – that’s a win for us and a win for our nation as a whole. We sell premium insurance coverage from A rated carriers and have made the process of securing business insurance much more efficient. Most of our customers see 20-25% reduction in premium and get a better product from a better carrier – a big win. Finally, we believe to truly solve the multi-billion dollar problem we call insurance there must be a collaborative approach. We are not looking to fully displace the insurance agents. We believe that when agents, insurance companies, and modern technology brokerages like Unbrokerage work together, the insured get the best result.
Need help navigating small business insurance and other major financial decisions? Contact Acuity’s Director of Development and Partnership. We’ll help you navigate through financial hurdles while connecting you with our trusted partners like Phillip and Andrew at Unbrokerage.