Nearly half of small companies now want their insurance policies to cover bad debts, according to new research by the Centre for Risk and Insurance Studies at Nottingham University Business School.

With financial concerns front of mind, the study reveals a business insurance ‘wish list' for the SMEs questioned. Over 40% said they would like their insurance to cover bad debts, one in five wished for more comprehensive protection of intellectual property and 16% wanted to insure against costs to sue suppliers for failing to deliver.

However, the study also indentified that many SMEs do not recognise that some risks can already be covered under business insurance policies. More than a quarter (28%) want to cover the cost of stolen goods, 22% of SMEs wished to cover loss of income as result of electricity, gas or water supply failing, 15% want cover for environmental damage and 10% were looking for compensation if a supply chain collapses. These are risks that many policies already cover, suggesting small firms do not fully recognise the value of existing insurance.
The recession may have led to small businesses viewing risks differently

"Business insurance policies cannot cover everything that can go wrong for a small business, however, with SMEs having a ‘wish list' for what they would like to be covered for, the report raises some important points about what business owners view as being most important," said Christopher O'Brien, director at the Nottingham University Business School Centre for Risk and Insurance Studies.

"The recession may have led to small businesses viewing risks differently, being particularly concerned about financial risks and looking for greater protection against issues that threaten their position in increasingly competitive markets. In addition, there may be circumstances beyond the business owner's control that they are not insured against, but could cripple the business. So there are areas where insurers may wish to consider expanding the protection they provide to help businesses protect their cashflow and reduce damage caused by loss of revenue."

The study also revealed that 52% of SMEs believe reduced demand for their goods and services is the biggest risk to their business with late payments in second place (41%), closely followed by concern about increased competition (32%).

The risk of financial issues continues with lack of cash flow to develop the business seen as a threat by nearly a third (29%) of SMEs and with financial institutions having restricted their lines of credit, lack of accessible funds was considered a risk by 15% of respondents.