As small businesses navigate an increasingly complex risk landscape, the insurance market protecting America's entrepreneurs is booming, with premiums soaring to $45.2 billion in 2022 and a significant 62% of small businesses now planning to purchase coverage in the coming year.
Key Takeaways
- The U.S. small business insurance market reached a value of $45.2 billion in premiums written in 2022
- Small business insurance premiums grew by 7.8% annually from 2018 to 2023
- There are approximately 33 million small businesses in the U.S., with 55% carrying general liability insurance
- 70% of small businesses with employees have workers' comp coverage
- General liability insurance is held by 74% of small businesses with revenue under $1M
- Only 36% of small businesses have cyber liability insurance despite 43% experiencing breaches
- Average claims frequency for small business general liability was 1.2 per 100 policies in 2022
- Cyber claims for small businesses averaged $25,000 per incident in 2023
- 43% of small business insurance claims are property damage related
- Average annual premium for general liability insurance for small businesses is $500-$1,000
- Workers' compensation premiums average $45 per $1,000 of payroll for low-risk small businesses
- Cyber insurance premiums rose 21% to average $1,800 annually for small firms in 2023
- 60% of small business owners cite rising premiums as top concern for 2024
- Cyber threats are the #1 emerging risk for 78% of small businesses in 2023 surveys
- 52% of small businesses plan to increase coverage for climate-related risks by 2025
The small business insurance market is large and growing due to increasing risks and demand.
Claims & Payouts
- Average claims frequency for small business general liability was 1.2 per 100 policies in 2022
- Cyber claims for small businesses averaged $25,000 per incident in 2023
- 43% of small business insurance claims are property damage related
- Workers' comp claims cost small businesses an average of $41,000 per claim in 2022
- Denied claims rate for small business GL policies: 12% due to exclusions
- Business interruption claims paid out $3.2 billion to small firms in 2022
- 28% of small business claims stem from customer injuries, averaging $35,000 payout
- Cyber ransomware claims rose 67% for small businesses in 2023
- Average auto liability claim for small fleets: $22,500 in 2023
- 65% of workers' comp claims for small businesses are recoverable within 90 days
- Product liability claims cost small manufacturers $1.8 million on average per case
- 19% increase in E&O claims for small professional services in 2023
- Property claims from weather events paid $4.1 billion to small businesses in 2022
- Slip-and-fall claims represent 31% of GL payouts, averaging $18,200
- D&O claims frequency: 0.8 per 100 policies for small nonprofits
- Average settlement for employment discrimination claims: $125,000 for small firms
- Fire claims for small retail: average payout $67,000, 15% of total property claims
- 72% of small business claims are settled within 6 months
- Inland marine theft claims averaged $12,400 per small contractor in 2023
- Medical malpractice claims for small clinics: $289,000 average indemnity
Claims & Payouts Interpretation
While the odds of a specific catastrophe are pleasantly small, the sheer variety of potential disasters—from a slipped customer to a digital hostage crisis—means that for a small business, proper insurance isn't a question of if you'll need it, but rather which statistical nightmare will come knocking first.
Coverage Adoption
- 70% of small businesses with employees have workers' comp coverage
- General liability insurance is held by 74% of small businesses with revenue under $1M
- Only 36% of small businesses have cyber liability insurance despite 43% experiencing breaches
- 82% of construction small businesses carry general liability, highest among industries
- Professional liability (E&O) adopted by 52% of consulting firms under 50 employees
- 65% of retail small businesses have property insurance
- Workers' compensation coverage rate: 91% for businesses with 10+ employees
- Business owners policy (BOP) held by 58% of eligible small businesses
- Only 24% of freelancers carry any form of professional insurance
- 77% of restaurants have general liability, but only 49% have product liability
- Cyber insurance adoption jumped from 19% to 34% post-2022 breaches
- 68% of home-based businesses lack commercial property insurance
- Directors & Officers (D&O) coverage in 31% of tech startups under 20 employees
- Employment practices liability insurance (EPLI) held by 42% of firms with 5-50 staff
- 85% of small manufacturers have product liability coverage
- Inland marine insurance adopted by 55% of contractors
- 29% of small businesses have business interruption insurance
- Umbrella liability policies cover 37% of small businesses with GL limits over $1M
- 71% of service-based small businesses carry professional liability
- Commercial auto insurance in 63% of small businesses with vehicles
- 48% of healthcare small practices have malpractice insurance beyond state minimums
- Key person insurance adopted by 22% of small businesses reliant on owners
- Flood insurance held by only 14% of small businesses in flood-prone areas
- 59% of e-commerce sites have cyber and product liability combined
Coverage Adoption Interpretation
It seems the small business community has taken the "hope for the best" part of the old adage to heart, while the "prepare for the worst" part is still waiting on hold, listening to elevator music and contemplating its life choices.
Market Size & Growth
- The U.S. small business insurance market reached a value of $45.2 billion in premiums written in 2022
- Small business insurance premiums grew by 7.8% annually from 2018 to 2023
- There are approximately 33 million small businesses in the U.S., with 55% carrying general liability insurance
- The global small business insurance market is projected to grow at a CAGR of 6.2% from 2023 to 2030
- In 2023, 44% of small businesses reported increasing their insurance coverage due to economic pressures
- Small commercial insurance accounted for 32% of total P&C premiums in the U.S. in 2022
- The number of insured small businesses rose by 12% between 2020 and 2023
- Cyber insurance for small businesses saw a 25% market expansion in 2023
- U.S. small business property insurance premiums totaled $18.7 billion in 2022
- 62% of small businesses plan to purchase insurance in the next year, up from 52% in 2021
- The small business insurance sector employed over 250,000 agents and brokers in 2023
- Premiums for small business workers' comp insurance increased by 5.4% in 2023
- E-commerce small businesses represent 28% of new insurance policies issued in 2023
- Small business insurance penetration rate stands at 68% in urban areas vs. 51% in rural
- The market for bundled small business insurance policies grew 15% YoY in 2023
- 41% of small businesses underinsure due to cost concerns, impacting market growth
- Small business insurance tech startups raised $1.2 billion in VC funding in 2023
- Average small business insurance policy value increased to $4,500 annually in 2023
- Non-employer small businesses (82% of total) hold 45% of insurance market share
- Pandemic recovery boosted small business insurance demand by 18% in 2022-2023
- Regional market leader: California small business insurance at $6.8 billion in 2022
- Insurtech penetration in small business insurance reached 22% in 2023
- Small business auto insurance premiums hit $9.1 billion in 2023
Market Size & Growth Interpretation
The small business insurance market is a bustling, $45-billion-a-year testament to the fact that America's entrepreneurs are increasingly aware that while you can't sue a tornado, a disgruntled customer, or a hacker, you can absolutely pay for the privilege of having someone else handle the fallout.
Premium Costs
- Average annual premium for general liability insurance for small businesses is $500-$1,000
- Workers' compensation premiums average $45 per $1,000 of payroll for low-risk small businesses
- Cyber insurance premiums rose 21% to average $1,800 annually for small firms in 2023
- Business owners policy (BOP) costs $1,400 on average for $1M coverage
- Commercial auto insurance averages $2,700 per vehicle for small fleets
- Professional liability premiums: $66 per month for consultants under $1M revenue
- Property insurance for small retail stores averages $1,200 yearly
- EPLI premiums average $2,000-$5,000 for 10-employee firms
- Umbrella policy adds $300-$600 annually to small business premiums
- Product liability insurance costs $1,000-$3,000 for small manufacturers
- D&O insurance averages $1,500 for small nonprofits with $500K budget
- Inland marine premiums: $500-$1,500 for contractors with $500K equipment
- Business interruption add-on costs 10-15% of property premium
- Commercial property premiums up 8% to $1,100 average in 2023
- Key person life insurance premiums: $200-$500 monthly for $1M coverage
- Flood insurance averages $900 yearly for small businesses in moderate zones
- Restaurant general liability: $1,200 average premium for $1M limit
- Tech small business cyber premiums: $2,200 average due to high risk
- Construction workers' comp: $3.50 per $100 payroll average
- E-commerce product liability: $800-$2,000 annually
- Average small business insurance costs increased 9.4% in 2023 due to catastrophe losses
- Freelance professional liability averages $28 monthly for basic coverage
- Small business flood premiums average $1,700 in high-risk zones
- Restaurant workers' comp: $2.50 per $100 payroll average
Premium Costs Interpretation
The small business insurance landscape is a stark reminder that protecting your dream from lawsuits, disasters, and digital gremlins is essentially a second, more expensive mortgage on your peace of mind.
Trends & Risks
- 60% of small business owners cite rising premiums as top concern for 2024
- Cyber threats are the #1 emerging risk for 78% of small businesses in 2023 surveys
- 52% of small businesses plan to increase coverage for climate-related risks by 2025
- Insurtech adoption expected to cover 40% of small business policies by 2027
- Supply chain disruptions prompted 35% of small firms to add BI coverage in 2023
- AI-driven underwriting reduced small business premiums by 15% for 22% of users
- 67% of small businesses face talent shortage risks, boosting EPLI demand
- Parametric insurance products for small businesses grew 30% in availability 2023
- 49% of owners report inflation driving higher replacement cost premiums
- Remote work increased D&O exposure for 41% of small hybrid firms
- ESG compliance risks lead 29% of small businesses to seek new coverage
- 73% predict higher cyber premiums due to quantum computing threats by 2030
- Gig economy small businesses see 25% rise in contingent worker insurance needs
- Climate migration increases property risk premiums by 12% in 10 states
- 55% of small businesses adopt usage-based insurance for fleets by 2024
- Regulatory changes on data privacy boost cyber adoption to 50% by 2025
- 38% of small retailers eye micro-insurance for seasonal risks
- Pandemic lessons: 64% now prioritize BI and event cancellation coverage
- Blockchain for claims processing adopted by 18% of small insurers serving SMBs
- 71% of small businesses worry about recession impacting affordability
Trends & Risks Interpretation
Small businesses are navigating a perfect storm of rising costs, cyber threats, and climate risks, demanding smarter coverage while pinning their hopes on technology to make it all affordable.
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