The Unseen Vulnerability: Uninsured Employees and the Risk to Your NZ Business

As a business owner in New Zealand, you understand the importance of mitigating risks to ensure the longevity and success of your enterprise. While many businesses prioritize insuring physical assets and liabilities, they often overlook a critical vulnerability: uninsured employees.

The Human Element: Why Employee Insurance Matters

Your employees are your most valuable asset. Their skills, expertise, and dedication drive your business forward. However, the unexpected loss of a key employee can have devastating consequences:

• 63% of NZ businesses report significant disruption due to the loss of a key person (Financial Services Council, 2022).
• 45% of businesses experience financial loss, with 21% facing significant financial hardship (Insurance Council of NZ, 2020).

The Financial Impact

Uninsured employees can cripple your business financially:

• Recruitment and training costs for replacement staff can exceed $20,000 per employee (Hays Recruitment, 2020).
• Lost productivity and expertise can result in revenue declines of up to 30% (Financial Services Council, 2022).

Key Person Insurance: A Safety Net

Key person insurance provides a financial safety net in the event of an employee’s unexpected death, disability, or serious illness:

• 71% of NZ businesses consider key person insurance essential for business continuity (Financial Services Council, 2022).
• Premiums are tax-deductible, reducing taxable income.

Succession Planning: Ensuring Business Continuity

Uninsured employees can also jeopardize business succession:

• 67% of NZ family businesses lack a formal succession plan (Family Business Australia, 2020).
• Key person insurance facilitates smooth ownership transfer and provides funds for shareholder buy-back.

Real-Life Examples

Consider the following scenarios:

• A software development company losing its lead developer to a sudden illness.
• A family-owned retail business facing the unexpected passing of its founder.

In each case, uninsured employees can have catastrophic consequences.

Mitigating the Risk

Protect your business by:

• Implementing key person insurance policies.
• Developing comprehensive succession plans.
• Providing employee benefits, such as life and disability insurance.

Industry Insights

A survey by the Financial Services Council found that:

• 81% of NZ businesses prioritize employee well-being.
• 75% recognize the importance of business continuity planning.

References:

• Financial Services Council. (2022). Key Person Insurance Survey.
• Insurance Council of NZ. (2020). Business Insurance Survey.
• Hays Recruitment. (2020). Recruitment Costs Survey.