Why 74% of SMEs are at risk of underinsurance

The 2025 Protection Gap Report published by specialist business insurer, Hiscox, revealed that 74% of small business owners surveyed have some level of underinsurance, highlighting the protection gap risk facing SMEs.

The report included responses from over 6,000 small businesses across the UK, USA, Germany, Spain and Portugal.

Key data:

Joanne Musselle, Hiscox’s Group Chief Underwriting Officer, said:

“As the business environment continues to evolve at pace, so too do the challenges that can impact the fundamental wellbeing of a small business. From cyber threats and supply chain disruption, to environmental events and shifting regulatory requirements, the landscape is shifting fast and it’s easy for it to feel overwhelming. The intention of this report is to help SMEs focus on some of those risks, and what they can do to minimise their exposure, and to help give them easier access to the resources that are out there to help and support them.”

Top tips to minimise your exposure to underinsurance:

1. Understand your personal risk landscape: Small businesses face a multitude of risks, so documenting some of that thinking via a risk audit or in a risk management plan can help.
2. Reassess your insurance needs regularly: Not every business needs every type of insurance product. The recommendation is to review your insurance every year or sooner if your business grows by 20% in revenue, headcount, product offering or operations. This helps to ensure your cover has evolved at the same pace as your business and you are not exposed to new or increased risk.
3. Stay updated on the latest developments affecting your industry and the broader risk environment: Lots of other businesses will be facing the same challenges as you, so find ways to share knowledge and gain fresh insights by engaging with trusted advisory sources. As an IoD member, you can access the latest information and guidance for your business through the Information and Advisory Service (IAS).

The checklist below can help you start thinking about the types of insurance your business might need. Keep in mind that you may require multiple types of cover, and it could be a good idea to check for overlaps with any existing policies.

If you’re not sure whether your current business insurance provides sufficient cover, now could be a good time to review your policies and secure the protection your company needs for the future.

Hiscox wants to help your small business thrive. Their blog articles will contain lots of useful information relevant to your growing business, but these articles do not constitute professional advice and must not be construed nor relied upon as such. To find out more on a subject we cover here, please seek professional assistance, specific to your circumstances.

*Any discount is only applicable to policies introduced via the Institute of Directors, whether existing or new, but could not be applied to policies that are being managed by an alternative third party such as an insurance broker.

Discount available for the lifetime of your policy applies on renewals while the Institute of Directors remains an Introducer Appointed Representative of Hiscox Underwriting Ltd.

Terms and conditions apply. Subject to underwriting criteria. For full terms and conditions see hiscox.co.uk/IoD/business-insurance.

For details about how Hiscox treat your personal information please refer to Hiscox’s privacy policy.

The Institute of Directors is an Introducer Appointed Representative of Hiscox Underwriting Ltd. who is authorised and regulated by the Financial Conduct Authority. For UK businesses only.