40% of small businesses will file an insurance claim by 2025

by Insurance Business America | Apr 02, 2015

About four in 10 small businesses are likely to file claims under their property or general liability insurance policies over the next decade, an analysis of claims data from The Hartford Financial Services Group reveals.
The insurer gathered data from more than 1 million claims it received between 2010 and 2014 to make the deductions, which were released this week. According to the report, the most common property and liability claims are for burglary and theft, which average $8,000 per claim.
The claims most costly to small business clients, however, are for libel, slander and violation of privacy; these averaged $50,000 per claim and could reach an average of more than $75,000 per claim if they result in a lawsuit. That happens about one-third of the time, according to The Hartford.
And while most small businesses will carry the proper policies to answer these eventualities, many are still underinsured or experience coverage gaps that can pack a big financial punch.
In fact, more than 65% of private companies do not choose to purchase directors & officer’s liability insurance, according to a survey from Chubb Corp., which could leave small business clients footing a hefty attorney’s bill if any of those lawsuits are directed against a company owner or executive. And that’s a significant possibility, says Gerald Maatman of employment firm Seyfarth Shaw.

“I think in the last three years, we’ve experienced more private and personal charges of discrimination than ever before,” Maatman said. “I think that’s more in the plaintiff’s trick bag now than ever before, especially with closely-held corporations.”

According to Chubb, a full 27% of private companies experienced a D&O lawsuit in the past 10 years, as compared to 33% of public companies.

The full list of claims most often filed by small businesses include:

  • Burglary and theft: 20%
  • Water and freezing damage: 15%
  • Wind and hail damage: 15%
  • Fire: 10%
  • Customer slip and fall: 10%
  • Customer injury and damage: Less than 5%
  • Product liability: Less than 5%
  • Struck by object: Less than 5%
  • Reputational harm: Less than 5%
  • Vehicle accident: less than 5%

The most costly claims and their average costs, meanwhile, include those involving:

  • Reputational harm: $50,000
  • Vehicle accident: $45,000
  • Fire: $35,000
  • Product liability: $35,000
  • Customer injury or damage: $30,000
  • Wind and hail damage: $26,000
  • Customer slip and fall: $20,000
  • Water and freezing damage: $17,000
  • Struck by object: $10,000
  • Burglary and theft: $8,000

John Kinney, chief claims officer at The Hartford, reminded small business clients that proper insurance is only one part of the solution.

“A small business owner can take steps to avoid these types of claims,” Kinney said. “By making simple modifications to operating procedures or following a few safety tips, a business can be better positioned to prevent accidents and property damage.”

For more information and resources to help you mitigate potential claims call our office at 734.454.4058 or email us at info@kennedynemier.com. Visit us on the web at www.kennedynemier.com.

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