Employee ownership - what is it and why is it good news when it comes to business insurance?

By Jack Durrant, Branch Director, BA (Hons), ACII

According to the Employee Ownership Association (EOA), employee ownership is experiencing rapid growth amongst company ownership structures. Between 2020 to 2022, the employee-owned sector more than doubled in size to over 1,000 employee-owned businesses, with the professional services, manufacturing, and construction sectors being top for employee ownership. 

What is employee ownership? Essentially, it means that employees have a ‘significant and meaningful’ stake in a business, with a financial stake ( by owning shares, for example) and a say in how it’s run.

Howden is the fifth largest employee-owned business in the UK. I take great pride in being part of an employee-owned organisation, but employee discussions regarding company ownership structures appear relatively uncommon.  It would be safe to assume that who owns a business may not be important to a number of people, but the impact of individuals on an organisation's risk profile is substantial. 

For many businesses, employees play a pivotal role in mitigating claims, whether it's ensuring workplace safety or reducing cyber risks stemming from human error. The added sense of responsibility and dedication from employees who have a stake in the company they work for is evident. This translates into benefits such as lower employee turnover, elevated workplace standards, enhanced skill retention, and ongoing skill development, distinguishing employee-owned businesses from their counterparts.

 Part of my role as an insurance broker involves conveying this narrative to underwriters and substantiating the advantages of insuring employee-owned businesses. Although employee ownership is still emerging in the UK business landscape, its rapid increase and the growing body of statistics from such enterprises are beginning to validate the anecdotal evidence. This enables underwriters to assess employee-owned businesses more favourably, offering better rates and terms.

While transitioning to an employee-owned model may present challenges initially, the evidence suggests that such businesses outperform their traditional counterparts. According to the Harvard Business Review*, employee-owned businesses demonstrate better performance, higher survival rates, and greater resilience during financial hardships. Therefore, if your business is employee-owned, it might be beneficial to communicate this aspect to your broker, as the emerging statistics can be leveraged to present your business more favourably to insurance underwriters.

*Source: https://www.uhy-uk.com/insights/employee-ownership-rise-sector-grows-37-last-12-months