New, separate research has higlighted that UK SMEs are facing a dual threat -- underinsurance and unassessed climate-related risks.
According to Premium Credit, around one in four SMEs (24%) have been underinsured over the past 12 months, while 35% have reduced their coverage during the same period, with some cancelling policies altogether. More than half (56%) report higher insurance costs since their last renewal, reflecting the financial pressures on small businesses.
Despite these challenges, a quarter of SMEs are now planning to increase coverage. Employers' liability cover is the most commonly planned increase, followed by property, vehicle and cyber insurance.
Jon Howells (pictured), chief commercial officer at Premium Credit, stressed that brokers can play a vital role by guiding clients through coverage reviews, identifying gaps and offering solutions that balance affordability with adequate protection.
A separate analysis by Vail Williams shows that three in four UK businesses (74%) have not assessed the risks posed by climate change to their operations. Even among businesses that have reviewed climate-related risks, few have taken action, with only 15% addressing supply chain disruption, 9% mitigating temperature increases, and 6% acting on flood risk. This leaves many firms exposed to increasingly frequent extreme weather events, including storms, flooding, and heat-related disruptions, which already affect infrastructure, employee availability, and supply chains.
David Thomas, head of energy & sustainability at Vail Williams, highlighted the growing exposure. “Businesses can no longer afford to be reactive. Carrying out thorough climate risk assessments, developing clear adaptation strategies, investing in more resilient infrastructure, and setting net zero targets are all critical measures to protect both their assets and long-term viability," he said.
The persistence of SME underinsurance and unassessed climate risks presents both challenges and opportunities for insurers. Claims costs may rise as businesses suffer losses from weather-related events, increasing the likelihood of partial or disputed claims. Insurers may face higher volatility in underwriting results, particularly for property, business interruption, and liability lines.
At the same time, the trends create opportunities for brokers and insurers to expand advisory services, offering risk assessments, coverage reviews, and climate resilience planning. Insurers who develop products that address both affordability and climate-related exposures could strengthen customer loyalty and mitigate future claims. Proactive engagement by brokers will be essential in helping insurers reduce the prevalence of underinsurance and improve the quality of risk portfolios across the SME sector.
