Research from Zurich Insurance has found that the structure and risk profiles of SMEs are changing, “SME customers are becoming more complex” says Richard Coleman, Interim Managing Director and Director of SME at Zurich.
This is true for the UAE as we are observing significant degree of change in the SME sector due to the digital revolution. Portions of the SME economy are now globalized.
Younger entrepreneurs are building their businesses quite differently. Born in the 1970s and 1980s, they understand the transforming effect of digital technology on almost every business sector. In the UAE, startup businesses are running leaner with less full-time staff and smaller premises. Some of them even operate without these altogether – hiring shared space, using freelancers and outsourcing non-core activities. The businesses they start are likely to be faster growing. They are advising older companies on how to use this technology to maintain and grow their businesses. They also have an international outlook right from the start.
However, irrespective of the nature of business, all SMEs have one thing in common, the need for business continuity, because it is an essential discipline for any organization despite of its size. It is about business survival.
As an example, in case your office was to suffer from a fire, flood or if you lost all IT systems, data, power or connectivity not to forget a key person, what are the odds that you will be able to recover your business in a timely manner without some insurance cover and professional assistance to provide critical resources, such as office space, telephony, internet access and essential IT support and money?
Business Continuity insurance minimizes negative business impact by getting your critical functions and activities up and running as soon as possible.
It will protect your revenue, cash flow client base, brand and reputation, as well as create confidence amongst your customers and supply chain.
Future insurance premiums will be reduced or could give you a better choice of insurer or cover.
Health insurance is now ‘largely popular’ in the GCC due to the introduction of compulsory health insurance schemes. It is obvious that SME owners are now forced by law to provide health insurance coverage for themselves and their employees. Many times, SMEs choose the cheapest and most basic insurance just to fulfill/meet the criteria of the governments. Insurance companies seem hand in glove ‘designing’ basic products that are a no brainer and an easy sale. It is all about creativity and volume, based on the cut-rate lowest denominator.
Many young entrepreneurs, in particular, are focused on technological risk without placing adequate emphasis on employment, health and safety or public liability risks.
Lack of awareness as well as the transient nature of expatriates are also key factors linked to the very low or no levels of insurance in the GCC. Insurance is a vital component of any successful SME; however, the majority of SME owners look upon this as a non-essential expense.
Many SMEs in the past have complained that insurers and brokers have failed to understand their businesses and the markets in which they operate. Therefore, insurers and brokers need greater understanding of how SMEs trade and the exact nature of their business as well as their requirements. This means brokers and insurers must now look for issues to be resolved as well as products to sell.
An interesting report based on YouGov SixthSense survey among its online SME panel (based on responses from over 2000 owners and managers within SMEs who have responsibility for or knowledge of the firm’s insurance activities) reveals the key issues of what SMEs need and what insurers must do to help solve the issue.
There is a huge disconnect about how SMEs approach insuring risks, what products they own how they purchase their products and what is offered to them by insurance providers brokers/agents in terms of advice, recommendation, insurances and amounts.
Below are some of the relevant questions you can ask yourself and understand the importance of insurance for your business. Chances are you may be confused, unaware, or under the impression that you have the appropriate amount and cover based on your characteristics of the SME (e.g. size, industry sector, age, etc.) It is helpful to ask as well as give appropriate information to the sales consultant so you get the best for your money.
- What is your general attitude towards insurance?
- What is your attitude towards income protection policies Life Insurance Critical Illness Permanent Total Disability?
- As an owner, are you aware or is this something your part time accountant or secretary takes care of:
Ø Ownership of and awareness of various insurance policies
Ø Insurers and brokers used to purchase insurance
Ø How well do you understand the insurances you own?
Ø How often do you assess you insurable risks?
Incidence of claiming and attitudes towards the claims process
In the likelihood of suffering an event or incident that might trigger an insurance claim
Ø What is your perceptions of the level of cover you currently have?
Ø What risk assessment and risk management actions have you put in place?
What information sources have you used to find your insurance deals?
Ø What factors determine what policy to buy/insurer to use (for example, online comparison websites)
Ø Face to face meetings with insurance providers/brokers
Ø How often do you search for new insurance deals?
How much do you spend on insurance? Have premiums changed recently?
Have you switched provider in the past? Are you considering this in the future? What prompted switching actions?
Forms of cover that can add value for SME owners
? Technological risk
? Health and safety
? Public liability risks
? Professional indemnity
? D&O cover
? Online trade and logistics
? Travel-related cover
? Life Insurance Critical Illness and Disability.
This is a two way street. SMEs need the Insurances. Thus, insurance companies must provide products specifically to those needs. While some products are standard, other will have to evolve.
Building awareness and educating SME owners about the importance, benefits, the negative/repercussions and impacts is essential.
Insurance brokers and agents must be knowledgeable and at least have a basic understanding of the segment of the market they cover, awareness of technicalities, even specialists in some cases.
About Sandra Saksena:
Sandra Saksena devotes her time and energies to her job in personal financial planning. She leads the first all-female team of financial counsellors at Nexus Insurance Brokers with whom she has maintained a professional relationship since 1996. Sandra heads the division Family Matters at Echelon Advisors and Management Consultants her family firm. Her focus is on financial advice and planning for women and small and medium business owners among others. She is a long time member and serves on various committees of the Million Dollar Round Table USA.
