Hibernian Insurance has introduced special discounts to help smallbusinesses manage their insurance costs, but more needs to be done, writes Laura Slattery.

For most people increases in motor, home and health insurance premiums will hurt, squeezing already tight household budgets to the limit. But if you run your own business, your entire livelihood depends on the availability of affordable insurance.

For owners of small businesses in Ireland, insurance is now more than just another overhead. It's what used to be known as the profit margin.

"Most of the small businesses are frustrated with the high level of insurance they have to pay," confirms Mr Gary Owens, managing director of Hibernian Insurance, which last week announced plans to help small businesses manage at least some of their insurance costs to an audience of business owners at the annual conference of the Small Firms Association.

Companies that use the insurer's new risk-management software will be entitled to a 10 per cent reduction in their premium.

A further 15 per cent discount is available to companies which agree to pay the first €5,000 of any claim - substantially higher than the excess some companies are currently liable to pay.

"It's about sharing the pain and sharing the gain," says Mr Owens.

If they agree to these conditions, small business owners can benefit from a total 25 per cent discount.

But, according to a recent IBEC survey, the cost of employer and public liability insurance - protecting against the risk of injuries to staff and customers - more than doubled between 1999 and 2002. Over the same period, property insurance costs increased by an average of almost 80 per cent, while commercial motor fleet insurance increased by 42 per cent.

Some sectors with poor claims histories, such as manufacturing, pharmaceutical and engineering companies, have recorded rises in the cost of insurance of 200 per cent.

"The high-risk industries have had much higher increases," admits Mr Owens. "If you are a claims-free business in a high-risk industry, you have probably been hit unfairly."

Hibernian, which insures one in three small businesses in Ireland, is also establishing an in-house specialist fraud detection unit to hunt down bogus claimants and is working with the Small Firms Association and the Health and Safety Authority on a series of seminars around the State on how to control insurance costs.

The first of these is taking place in Dublin today and will outline "dos and don'ts" for claims management, health and safety checklists and money-saving tips to companies crippled by the cost of insurance and worried about the future of their business.

"Very welcome" is how Mr Pat Delaney, director of the Small Firms Association, describes the Hibernian initiative, but he argues that a review of the system through the setting up of the Personal Injuries Assessment Board is still needed to solve the problems such as the high value of awards to claimants and large legal bills.

"Whiplash claims in the UK are an average of €1,600. The same claim in Ireland would be €16,000. If you add legal costs, the bill comes to €24,000," says Mr Delaney. As a result, premiums here are at a high level - too high for many small businesses.

According to the Irish Small and Medium Enterprises association (ISME), one in five of its members have already indicated that they have let people go. "That's so far," says Mr Jim Curran, head of research at ISME.

"What's even more frightening is that two out of every five have indicated that if the situation continues they will have to let people go," says Mr Curran.

"Another trend we're seeing is companies not getting any quotes whatsoever. It's putting them out of business. For construction, manufacturing and engineering companies, it's mandatory to have insurance to get contracts."

Almost 60 per cent of respondents to the IBEC survey said they had some difficulty in obtaining alternative quotes for insurance cover.

One firm commented: "Premiums quoted were presented more or less on a 'take it or leave it' basis."

Another noted that Irish based companies effectively would not quote, while others mentioned the withdrawal of British insurers from the Irish market. Mr Owens estimates that one in 10 businesses in Ireland is uninsured. "Because employers' liability is not compulsory here, if costs go up, a percentage of businesses will go uninsured," he says. If an accident was to take place on the premises of an uninsured business, the owner could be sued and risks losing personally-held assets such as their home.

Some larger companies rely on a practice known as "self-insurance", where money is paid into a reserve that will fund small claims.

Others close down or are forced to lay off staff. Employees will often have children to look after and mortgages to pay off, notes Mr Delaney, so through this "ripple effect" insurance increases are affecting family as well as company finances.