A trend that began out of financial necessity seems to be growing.  Initially, it was businesses along the Florida coasts dropping their property insurance on owned buildings when the prices skyrocked (Palm Beach Post 7/9/06).  Like many trends, however, this one is both nationwide and seems to have started in California.  As far back as 2002 there have been major articles published in respected media noting both the trend and its implications (Los Angeles Business Journal 8/2/02).  With three and four-fold increases in premiums businesses began to "go bare." 

Both economists and journalists have noted that this action will lead to increased business failures which can both damage the local economy, and if unchecked could tip the nation into a recession (ezinearticles.com/?business insurance [multiple articles]); (thinkinglike.com [risk management]). 

"While buying less of anything is usually considered to be a rational economic response to higher prices, the strategy of buying less insurance--or going bare altogether--will almost certainly lead to more businesses being burned by a wide variety of existing and emergent perils.  The fact of the matter is that the six million businesses in the United States operate in an environment that is more uncertain and more hostile than ever--and the threats against them seem to multiply by the day. Terrorists want to destroy their property, employees claim harassment and discrimination with ever greater frequency, angry shareholders sue every time the company's stock swoons, and trial lawyers file dubious but expensive-to-defend suits by the dozen. " (Hartwig, Robert P.; National Underwriter Property & Casualty Risk & Benefits Management. 02/18/02.  Available online at http://goliath.ecnext.com).

Note that the above quote is from 2002... The number of uninsured business has continued to rise since then.  The continuing increase in premiums for all insurance has caused smaller firms to cut health insurance benefits for employees as well, another trend that increases consumer costs and contributes both to inflation as well as increases the risk of recession.  A study released by the Robert Woods Johnson Foundation in March 2003 noted that  "Smaller businesses are slightly more likely than larger businesses to report this as a significant problem (55% of smaller businesses, 50% of medium businesses and 48% of larger businesses report this as a significant problem)."  ( http://covertheuninsured.org/media/BusinessSurveyReport.pdf).

The Kaiser Family Foundation funded a study for the calendar year 2005 and found that only 47% of businesses with less than 10 employees were able to afford offering any form of health insurance to employees.  They further noted, "It's tempting to dismiss that group of very small companies -- those with 3-9 workers. But consider the fact that 4.5 million companies have fewer than 10 workers, according to the U.S. Small Business Administration. Combined, they employ about 12.5 million private-sector workers." (http://blogs.usatoday.com/smallbiz/2006/08/in_rising_numbe.html).  Florida Trend, in a major article on business insurance conceeded, "Self-insurance -- going bare -- is increasingly common among Florida business owners who either can't afford skyrocketing windstorm insurance coverage or can't find it at any price. " (Florida Trend. 12/1/06. Available online at www.floridatrend.com).

So, just what are the benefits and risks of "going bare?"  The only benefit is saving the expense of the premiums, although in many cases that may be the difference between being profitable or going out of business.  The risks however, are many.  First, there is the financial risk to your assets.  A good article describing the need for various types of business insurance, 'Business Insurance 101' is available at http://www.iiaba.net/TC/Consumer/Business/bizinsurance101.htm .  Second is that you become an uncompetitive employer and are unable to attract and keep quality employees.  Third is that an accident or incident results in a lawsuit which leads to negative publicity and drives customers away.

The bigger question may be, "What can a business owner do about insurance costs?"  Here are some thoughts:

First, shop around.  Don't assume that the company you've been dealing with for years has the best rates.

Second, see if there is an organization you can join that has group coverage at a better rate than you can obtain as an individual.  This can include chambers of commerce,  merchant's associations, and trade or professional associations. 

Third, become politically involved in the issue.  Government regulations affect and will continue to affect rates.  Euclides, in the third century B.C., noted about democracy that a man who does not participate, does not belong in a democratic society, nor should he expect to reap its benefits.  While early Greek democracy was a limited democracy (women and slaves were not free nor allowed to vote), it is interesting to consider that the earliest democracy from its start expected its citizens to be involved.  A popular notion today is that "if you aren't at the table, you may be on the menu."  Speak up for your business interests, or support others who do.  Local and national chambers of commerce and other business organizations all take positions on issues that affect their members.  "Let your voice be heard!"

Fourth, as regards employee coverages, speak to employees and find out their preferences.  I have some clients where employees were willing to forego wage increases for several years in order to retain their current medical benefits.  Find out what the employees' priorities are.

Fifth, again as relates to employee coverages, consider offering employees a menu of items to choose from.  If you express total benefits as a percentage of pay, you can let employees choose more or fewer vacation days, more or fewer sick days, and the outside coverages they want... up to the total dollars represented by the percentage of pay.  The result will be individually tailored plans that meet each employee's need.

Sixth, don't assume the above are the only choices.  Network with other business professionals and entrepreneurs to explore additional options.