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Protect Yourself From Costly Small Business Insurance Claims

Fires are some of the costliest small business insurance claims A little over two years ago, The Hartford released a summary of the most common and costliest small business insurance claims. At the same time, they made a startling prediction. Based on its analysis of over a million claims made between 2010 and 2015, they surmised that 40 percent of all small businesses would experience a property damage or liability claim during the next 10 years.

As a small business owner, mitigating risk should be an important part of your business plan. We hope this data will help you learn where you’re most vulnerable and how to keep your assets safe.

Most Common Small Business Insurance Claims

Not surprisingly, the most common business insurance claims were for burglary and theft. Twenty percent of small business insurance claims were in this category. But the payouts on these types of claims were relatively low. In fact, burglary and theft did not even rank in the top 10 costliest claims analyzed by The Hartford. The average amount paid by the insurer was $8,000.

In order of frequency, the next four of the top five most common claims were:

  • Water and freezing damage (15 percent)
  • Wind and hail (15 percent)
  • Fire (10 percent)
  • Customer slip and fall (10 percent)

The Costliest Small Business Insurance Claims

By contrast, the costliest of the small business insurance claims analyzed by The Hartford was reputational harm. This type of claim includes defamation, slander, libel and copyright infringement and cost the insurer an average of $50,000. If the claim resulted in a lawsuit, the cost went up by about 50 percent.

The remaining top 5 costliest small business claims were:

  • Vehicle accident $45,000
  • Fire $35,000
  • Product Liability $35,000
  • Customer injury $30,000

How to Protect Your Business

Although no one can mitigate against every risk, even small changes to your current policies may help protect you from a claim. Here are a few tips to help keep your business safe.

Theft and burglary

  • Vet employees carefully.
  • Do criminal background checks on every new hire.
  • Install security cameras and motion-activated lights on the exterior of buildings.
  • Keep hedges around windows and doors trimmed back.
  • Install keyless entry system on exterior and interior doors.

Reputational harm

  • Create and enforce a social media policy that prohibits employees from making defamatory statements about competitors online.
  • Never make negative comments about competitors to customers. Talk up your strengths instead.
  • Never appropriate copyrighted material to use in marketing, advertising or on your website.
  • Make sure marketing and advertising materials are 100% original.

Fire

  • Install fire-suppression systems, such as sprinkler systems and carbon monoxide alarms.
  • Keep an appropriate number of working fire extinguishers on the premises.
  • Train all employees in fire suppression measures (e.g. how to use a fire extinguisher properly.)
  • Establish and clearly mark a fire evacuation route.
  • Conduct routine safety drills with key employees.

Vehicle Accidents

  • Screen employee’s driving records before allowing them to use company vehicles.
  • Perform regular maintenance on company vehicles (brakes, fluids, tires, hazard lights.)
  • Don’t reward employees for speedy deliveries. Reward safety conscious behaviors instead.

Customer Injury

  • Keep aisles clear of electrical cords and other debris.
  • Cordon off areas that are not meant for customer use.
  • Install adequate interior and exterior lighting.
  • Clean up spills immediately.
  • Post “wet floor” signs.
  • Shovel snowy driveways and walkways and use salt and sand to prevent slips and falls.
  • Repair frayed carpets.
  • Install mats at entryways.

Product Liability

  • Deal only with reputable suppliers and contractors.
  • Keep meticulous records, including original design specifications and change orders.
  • Comply with all required safety labeling requirements.
  • Solicit and pay attention to customer feedback. You may prevent an injury if you heed customer complaints.

At The Carmoon Group, we are experts in helping small businesses manage risk. So why not give us a call today to set up an appointment for your annual insurance review. Too busy to call? Contact us online and we’ll get back to you right away.

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Floyd Arthur

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