Insurers are breaking industry rules by giving small firms precious little time to renew essential cover, a business lobby group has claimed.

A new report by the Federation of Small Businesses (FSB) found that over half of insurance companies were failing to give entrepreneurs enough notice to renew employers’ liability cover – which is required by law when taking on staff.

Guidelines introduced on 1 November last year by the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) demanded that insurers give firms 21 days notice to renew their policies.

However, the FSB said that its research has found that more than one in ten small businesses were given less than one weeks’ notice to extend their employers’ liability cover.

Over half of those surveyed said that they were given just two weeks’ notice by insurers.

The FSB claimed the failure to meet these guidelines meant that small firms are given hardly any time to search for an affordable quote – a task which the lobby group said was difficult or impossible for a quarter of businesses.

Previous studies have revealed that many small firms are operating without employers’ liability insurance due to the soaring cost of premiums.

This lack of cover can prove to be disastrous for businesses.

Not only is it against the law not to have employers’ liability insurance if you have staff, the cover also provides bosses with a degree of protection in court if an injured or ill employee makes a compensation claim.

John Walker, policy chairman at the FSB, said that insurers should give small businesses more notice.

“While businesses may have weathered the 100 per cent premium increases common over the last few years, there is still a significant number of employees who find employers’ liability insurance difficult or impossible to secure.

“For these firms in particular, it is vital that they get as much notice as possible to allow them to hunt around for affordable cover.

“We are calling on the ABI to enforce the industry’s commitment to giving businesses 21 days notice that their policy is up for renewal – even where it’s sold as part of an insurance package,” he said.