Small Firms’ Problems

What do small business operators in California see as their No. 1 problem?

The cost and availability of liability insurance, according to a recent survey by the National Federation of Independent Business.

The second-most troublesome item for the state’s small businesses is the cost of health insurance.

The ranking of the two problems by the state’s firms was close to the results for businesses nationwide. But the 2,500 business surveyed across the country ranked the cost of health insurance ahead of liability insurance.

“The liability insurance crisis has really battered some small-business owners, so we expected that it would be rated as critical by a large number of people,” said John Sloan, president of the NFIB, whose membership of 500,000 makes it the nation’s largest organization of small businesses.

“We were somewhat surprised that health insurance costs troubled an even larger number of business owners.”

He explained that the group recently arranged for competitively priced group health insurance policies to be made available to the members.

Small businesses in California are expected to get some relief from sudden cancellation of liability insurance policies, thanks to a package of bills recently passed by the Legislature and signed by Gov. George Deukmejian.

Under the legislation, insurance companies will be prohibited from canceling liability insurance midterm and be required to give advance notice of non-renewal, effective Jan. 1. In addition, the state insurance commissioner will oversee development of a “market assistance plan.”

The NFIB survey showed that cash flow was the third-most troublesome item for small businesses both nationally and in California.

A surprise, according to Sloan, was the high ranking (fourth in California and fifth nationwide) of telephone costs and services.

“Telephone costs are what we are really hearing a lot about. There is a sense that ‘we’ve been really had by AT&T;’ in what has been happening to rates as they affect small business. . . . When people were asked where they see future increases in costs, telephone (service) is still one of the things they have a difficult time controlling,” Sloan said.