Three-quarters of small businesses in the UK are breaking the law and risking fines of up to £2,500 a day by not having the right insurance in place.

According to the research by Finaccord, many small businesses do not even have employers' liability cover in place, despite this being a legal requirement on all business employing staff, even voluntary ones.

Over half of small firms are under-insured for the commercial activity they undertake, the research added, meaning they are at risk of going out of business if they are the victims of unexpected events such as fires or flooding.

"The recent summer floods have resulted in £3bn of claims from 50,000 businesses, many of them smaller businesses," said Neale Phillips, head of insurance at British Gas Business.

"Events such as these can interrupt trade for weeks but inadequate insurance could spell the end of any small organisation," he added. "The financial implications of not having compulsory policies in place are also astronomical. I urge all small firms to check their insurance requirements today."

The research also revealed that over half of small companies would like to buy their insurance online but only 15% currently do so, prompting British Gas Business to launch a dedicated online business insurance comparison service.

"Unlike the personal insurance market, where internet searching has been truly embraced as it keeps the customer firmly in control, this simply hasn't happened in the business insurance market," comments Neale Phillips, head of insurance at British Gas Business.

"Until now, small firms have been reliant on finding and trusting a reliable broker but the high levels of under-insurance indicate that this traditional model alone is no longer viable."