The Public Liability Insurance Blog

Can you have a generic small business?

Small businessesSometimes, the term “generic business insurance” gets thrown about as a shorthand for public liability insurance and employers’ liability insurance but this is only ever going to be a core of a comprehensive policy. If you want to cover everything that a business is liable for, you will definitely have to go into more detail than that, answer a few more questions than that and get something a little bit more tailored and bespoke.

At least, that’s what I assume. Maybe it is possible to have a generic small business that can be covered by a basic policy? I’ve always operated under the assumption that something that’s just the bare minimum is possibly running the risk of becoming a waste of money for the lack of cover it can end up providing, but perhaps that’s wrong? With this in mind, let’s take a look at the basic parts of a business and see if it can be generalised.

Can you generalise structure?

Company structure used to make sense to me. You have a managing director, you have different department managers and then you have team members. Simple as that. Of course, then you have a chief executive officer, and managers of sub divisions of those teams, and managers that manage more than one team, and then chief financial officers and chief operating officers and chief technology officers and...temps...

The capability of a large company to start some how breeding middle managers and new divisions is frightening, but what’s worrying is that this chaos can easily be imbedded in when a company is at an earlier stage of development. Even a small company can become a convoluted mess by the time it starts collating more diverse roles into individual people.

Company structure therefore cannot be generalised, although you can normally rely on there being more people at the bottom than at the top. Normally.
Verdict: Sort of

Can you generalise stages of growth?

You can probably get away with generalising the stages of growth in the business world. Businesses will usually start from the same sort of place and have similar milestones along the way, going from a venture largely constrained to a spreadsheet on a laptop through to its first employees, its first office and then expanding out from there.

However, what you can’t generalise is the speed at which companies grow. You might be able to recognise similar phases in the growth of a business but the rate at which trading accelerates and stalls will vary massively between different industries.
Verdict: Yes, but not usefully

Can you generalise on business purpose?

All businesses exist to do one thing: make more money than they spend. On that level, you can absolutely generalise small businesses. They are all trying to stay away from debt and they are all trying to make a profit for their owners.

However, whereas some companies intend to grow, expand and take over the world through corporate machinations, others merely aim to sustain the lifestyle of the owner. Not everyone has the same grandiose plans.

Not only that, but for some companies, making money is actually a secondary goal. An entertainment company for example (and this may be incredibly naive of me to think this way) might be looking to produce things that are of a high quality and only be interested in making money to keep itself afloat as opposed to maximising just how much it can make.
Verdict: Not beyond a requirement to make more than it spends

Can you generalise on risk?

To a certain extent, companies all share similar risks. There is after all a reason why a basic public liability insurance and employers’ liability insurance policy will form the core of most companies’ business insurance. Practically everyone has the risk of a public liability claim, or an employers’ liability claim, but outside of that different lines of work do have different risks attached.

Beyond that, tools cover is unlikely to be required by a PR firm, professional indemnity is unlikely to be required by a hairdressers and the risks faced by a pub will be subtly different to those faced by a shop.

However, if you’re looking at different businesses within the same market, you might obviously be able to generalise a little more. Then again, every business, as established above, is a different scale and grows at a different rate with different purposes driving it. For this reason, it actually remains difficult to generalise on the risk.
Verdict: No

The generic business

From the points above then, your generic business aims to make more money than it spends, has less people at the top of its corporate structure than at the bottom, faces risks consistent with its industry and goes through different stages of growth.

That’s not really enough to generalise an insurance policy beyond basic public liability and employers’ liability cover. Beyond that, the size of your business, the specialist areas of your business and the unique quirks of your business will all need to be taken into account.

The good news

From an insurance perspective at least, the good news is that a good broker or half decent quote comparison site will be able to quickly navigate the insurance options for you and get the right cover for the specific demands of your company. Despite your company being unique, it won’t be you that has to do the leg work in covering all the relevant at-risk areas.

There is no such thing as a generic business and therefore there cannot be such a thing as a generic business insurance policy. If you’re looking for a one size fits all approach, you’re going to be disappointed or even worse under-insured. Instead, look for helpful brokers that will go through options with you and offer you a wider range of additional cover to protect the smaller elements of your business.

Written by Richard King for YOUR Insurance, a specialist broker that would only sell you generic business insurance if it was possible to have a generic business.

Image Credit: A photograph of several small businesses in Scotland by Mary and Angus Hogg via Wikimedia Commons.