The CBI has warned the cost of insurance cover is threatening the existence of small businesses.

President of the CBI Sir John Egan said the problem had been partly fuelled by "no win no fee" arrangements.

Forum Response: Federation of Small Businesses

A spokesman for the FSB told ePolitix.com: "The FSB welcomed the Department of Work and Pensions report on employers' liability insurance last month and is pleased to have worked the minister for work on the issue.

"However we have emphasised that just because the report has been published, it doesn't mean that the problem has gone away. The fundamentals of the market have not changed and small businesses are still facing rapidly escalating insurance premiums."

Forum Response: Institute of Directors

Patricia Peter, corporate governance executive at the IoD, said: "We agree that small businesses are finding insurance cover an ever-increasing burden which is driving many of them out of business or at the very least hampering their ability to prosper. A further concern is those less responsible businesses which continue to trade in breach of the law.

"This problem is not confined to the compulsory employers' liability cover but extends also to public liability cover, particularly in certain sectors of business.

"At present, particularly for small businesses, there do not seem to be adequate means of ensuring that the burden falls on those with poor health and safety records.

"A key issue that has to be addressed is the growth in the claims culture. Claimants who stand to lose nothing by suing are an increasing burden on the system, since win or lose their costs are cycled back through those who are insured."