News: Business Owners - mind the gap

More than four in 10 business owners say their companies would be forced to fold within a year of the death or critical illness of a key person, research has found.  The study from Legal & General found some two-fifths (44%) of those surveyed fear they would struggle to continue the business without the input of a vital employee.

However, according to the survey, only 4% of business owners have shareholder protection in place and one in two (48%) does not have any formal agreement to establish what would happen in the event of the death of a business owner.

The results come as the same research concludes the key person protection gap has edged over £400 billion while the business protection gap, which also encompasses corporate debt and shareholder protection, has climbed above £1.1 trillion.  Business protection provides peace of mind for company owners that if they or another key person falls terminally or critically ill, or dies, the business could still survive.  It encompasses key person protection, partner/director share protection and business loan protection.

According to Legal & General, the figures show just how few businesses are prepared to handle an event such as the death or critical illness of a key person or business owner and the company went on to suggest it was the responsibility of the protection industry to get in front of corporate clients and make business owners aware of the importance and benefits of key person, shareholder and business loan protection.

Another finding of the research was that, while half of the businesses surveyed have corporate debt, just 46% of those businesses have life or critical illness policies in place to cover that money owed. Overall, the research estimates there is now a corporate debt gap of just under £300bn, a shareholder protection gap of more than £400bn and a key person protection gap of more than £400bn, which adds up to a total business protection gap, therefore, of £1.1trn.

The survey, which was based on the responses of members of the British Chamber of Commerce, is the first time in four years any organisation has published an update to Swiss Re's widely cited research from 2005. In that report, entitled Protection at what price?, the reinsurer concluded that, out of nearly 4.5 million businesses in the UK, 90% did not have any business protection in place.