Insureon Small Business Institute
First published November 2013
Since 1982, the number of small and micro businesses in the U.S. has increased by 49%, to between 27.9 million and 42 million entities. Several factors have impacted this growth, including shifts in large businesses toward hiring independent contractors (rather than fulltime employees) and evolving generational values, with younger professionals often prioritizing flexibility over stability. Analysts predict that these trends will accelerate in coming years, cementing the transition toward a “freelance economy.”
But with their increased presence in the U.S. economy comes an increased exposure to litigation for micro businesses. The U.S. Chamber of Commerce’s Institute for Legal Reform reports that more than half of all tort cases in the U.S. (57%) target businesses with less than $1 million in revenue – and fully one in three small U.S. businesses has been either threatened or actually charged with a lawsuit. Those lawsuits cost micro businesses billions of dollars in legal fees – costs which are then passed on to customers. This means that commercial liability insurers, by helping micro businesses minimize lawsuit expenses with appropriate insurance products, have a tremendous opportunity to reduce costs to both business owners and the customers they serve.
Promisingly, the process of connecting with and educating micro businesses in need of liability protection may be easier now than ever before. Research shows that, as of 2013, the majority of business owners are comfortable purchasing commercial insurance products online.
This finding is reinforced by search engine analytics, which show precipitous increases in search terms related to business insurance.
This report examines growth trends for small and micro businesses in recent years, the sector’s need for liability protection to increase revenue and retain customers, and the role insurance advisors can play in facilitating micro business growth.