Small businesses may be growing their revenue, but the vast majority–75 percent–are not adequately protecting themselves and their assets.

Small businesses are an essential part of the U.S. economy, with 56 million workers employed at firms with fewer than 50 employees, representing 45 percent of all private-sector jobs as of the first quarter of 2022, according to the U.S. Bureau of Labor and Statistics.

However, the 2023 Hiscox Underinsurance in Small Business Report, which surveyed 1,000 small businesses last July, found widespread insurance illiteracy and a nationwide underinsurance crisis, leaving small businesses open to loss risks ranging from property damage to lawsuits.

Of the small businesses participating in the survey, 75 percent were underinsured, and over 70 percent did not understand what business insurance coverages.

• 65 percent had general liability coverage
• 45 percent had property insurance
• 35 percent had workers compensation insurance
• 32 percent had professional liability insurance
• 47 percent have increased revenue since 2021
• 32 percent have had a decrease in revenue during the same period

Of those businesses that had coverage, 68 percent of those with coverage purchased it because they were concerned about the consequences of a potential claim. Only 20 percent noted they purchased insurance because a vendor or partner mandated it.

These statistics point to an opportunity for local insurance agents and brokers to step in and become an invaluable resource for small business owners.

Of the small business owners with insurance, 70 percent still choose to purchase through an agent or broker, and most find them to be the most helpful source of information (56 percent). Only 29 percent of respondents reported choosing to purchase insurance online, while 42 percent preferred to purchase insurance in person, emphasizing the importance of local brick-and-mortar agents for small businesses.

And small business owners need that expertise. Of those surveyed, 71 percent do not understand what a business owners policy covers and 83 percent fail to describe a general liability policy’s coverage correctly.

Of the U.S. small businesses operating for 10 years or more, 39 percent have never updated their general liability insurance.