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12 August 2020

Essential insurance for new start-up businesses

We are currently seeing a plethora of new start-ups in the UK, taking advantage of opportunities created by the pandemic. Given that 20% of start-ups fail in their first year*, with only 40% making a profit*, and with the pandemic creating a unique set of challenges, it’s essential you’re covered by adequate insurance if you’re commencing a new business venture.
 
Inevitably, the explosion of new start-ups includes cleaning services, face masks, sanitiser products and screening services. Research and development, too, is an area of growth, with the Chancellor, Rishi Sunak, announcing £750 million of grants and loans for SME’s driving innovation, from tech to life sciences, as part of an overall £1,25 bn package to support fledgling new companies. Other growth areas include online crafts, workouts and nutrition, food & drink delivery and online fashion.
 
Given the tough trading conditions we currently face, failure to protect your new business could easily bring it to its knees. Whatever the nature of your start-up, we recommend you consider an appropriate package that addresses the myriad risks your business might face. Some of these considerations include the following:
 
Employers’ liability
Employers Liability insurance is a legal requirement if you employ staff, whether permanent, temporary, short term, casual or contractors, and there are strict penalties for those businesses not covered. This cover protects you against compensation claims arising from employees sustaining injury or illness as a result of their work for you.
 
Business Interruption (BI)
Nobody expects their business to be affected by such disasters as flood, fire, impact, explosion or water damage, but should they occur, you cannot rely on other policies to cover your losses. BI insurance covers loss of profits/revenue or increased costs of working while the damage is being repaired. Bearing in mind it can take a long time to replace stock, equipment & specialist tools and for premises to be deemed safe, it’s vital your claim will pay enough to support you while your business is unable to operate as usual. Any business without this cover may well face termination or financial difficulties. There are also non-damage events that can cause business interruption - for example an outbreak of food poisoning or your local area being closed off causing loss of attraction - to keep in mind as well, which could adversely affect your ability to trade and to service customers.
 
Directors and Officers Liability
With global changes to legal and regulatory requirements placing growing accountability on directors and officers, we live in an increasingly litigious culture, with legal action ever more prevalent. Added to this, the challenges presented by the pandemic and a rise in Covid-19-related claims certainly seems likely. D&O cover protects you from legal actions brought against you by shareholders, investors or other stakeholders; employees for injury or breach of employment law; class actions; and regulators.
 
Cyber Cover
Cyber criminals are taking advantage of the pandemic, with a hacker attack taking place every 39 seconds and a small business attacked every 91 seconds. While prevention is the best policy, with all staff working to best practice, protection through cyber insurance is essential, not only mitigating your exposure to risk but also providing financial protection and access to post-breach recovery services in the event of an attack. As required, your policy can include:

-     IT forensic costs
-    Legal costs for data breach
-    Data restoration
-    PR and notification costs
-    Credit & identity monitoring
-    Business interruption from cyberattack
-    Cyber extortion and ransom payments
-    Access to a 24/7 incident response line.  
 
Others
Public Liability is essential for many businesses, offering protection if clients, suppliers or members of the public suffer personal injury or property loss because of your business. Although it is not a legal requirement, most businesses choose to take it out. Product Liability is also a good idea for anyone who designs, manufactures or supplies physical products, covering the cost of compensation claims if anyone is injured or their property being damaged by a product you have sold or given away.
 
Help for start-ups
To help keep costs manageable and your premium affordable, you may initially opt for lower indemnity limits or a higher excess. Some start-up policies also provide added value features that you do not need to pay for, such as tax advice helplines, templates and documents to assist your risk-management and HR processes.
 
With many years’ experience arranging cover for SMEs, we can advise on the level and extent of cover you need to have in place for your new enterprise. Cover can generally be provided within the same or next working day and we can provide a dedicated account manager to handle all your insurance needs.

To discuss your insurance requirements and enquire about potential packages for your start-up business, please contact us at [email protected] or by calling 0116 265 4300.
 
Sources:
Review 42: What Percentage of Startups Fail?
BBC: Coronavirus: Government unveils £1.3bn scheme to help start-ups
BBC: Coronavirus: Five firms booming despite the lockdown
GOV.UK: https://www.gov.uk/government/news/billion-pound-support-package-for-innovative-firms-hit-by-coronavirus
Forbes: Startup Opportunities Coming Out Of The Pandemic