As the number of SMEs continues to rise, statistics from AXA Business Insurance suggest that the majority of the 4.9 million SMEs in the UK are, probably unknowingly, operating without the insurance cover they need and over half a million are potentially breaking the law in the process.

53% of those requiring Employers’ Liability cover by law have failed to buy it, while 43% of those meeting with the public/clients/suppliers neglect to protect themselves against any accidents/damage they may be responsible for.

52% of those paid by clients for business advice fail to buy professional indemnity cover and four in ten don’t buy the insurance they need for using their car or van for their business.

The research found that the majority of SMEs do not have enough savings to tide them over for more than a couple of months without working. Yet over three quarters of these have no protection for personal accident.

The research, carried out by AXA among the UK’s SMEs shows a worrying lack of protection among what is a fast growing and important part of the UK economy.

Darrell Sansom, managing director of AXA Business Insurance, said: “Insurance may feel like one of the little bits of admin that you ought to sort out at some point but not having it can have big consequences. Claims for liability can run into millions of pounds and not having cover in place is putting you, your business, your employers, clients and others at risk.”

Employers’ liability is required by law for all businesses who employ staff whether they are part time, full time, permanent or contract. AXA asked all those with relevant employees if they had cover in place and over half were found to be lacking. Furthermore, of those that did have the cover in place, 23% failed to display a certificate – an offence that can be punishable with a £1,000 fine.

Motor insurance is also a legal requirement. Many business owners use their own vehicle for their business but only 59% of those have bought either a specific commercial policy or added the required business cover to their regular motor insurance policy. This is required even if the vehicle is only used occasionally in relation to the business.

Only 26% of those who run their business from home have spoken to their home insurer about cover for their business and just 22% have arranged any cover for taking their business equipment (laptop/phone etc) away from their home yet over two thirds have a laptop and a mobile/smart phone.

And only 19% of those who keep their business tools at home have arranged cover for them.

Sansom added: “We appreciate that generally, there is no intention on the part of these businesses to break the law or to put themselves and others at risk. Often it is a case of not knowing what’s needed, forgetting to do the admin or possibly worrying about the additional cost of insurance. But a little attention to detail could really mean a lot if you have to make a claim. The average cost of a liability or professional indemnity policy is about £17 a month. And adding business cover to your motor insurance will only cost a few pounds per year.

“If you weigh this up against claims that can rise to millions of pounds, or legal proceedings against you, skipping on the insurance really is not a risk worth taking.”

The AXA research looked at SMEs who had some level of insurance cover to establish where the gaps in that cover might be. There is also evidence that many businesses, particularly those set up from home, have no insurance at all – in a recent report looking at home based businesses 56% had not notified an insurer that they were running a business from home.