24 November 2015
5 reason's why its important for SME's to have insurance.
by Phabiola Menon, Director - Broker Channel
Bringing up the topic of insurance around small business owners in the UAE often leads to a tepid response. Many view it as an unnecessary expense, while others who may believe it to be important, see it more as a luxury instead of a necessity. However, the fact is that SMEs need to realize that insurance is a necessary investment, rather than an ancillary cost.
Insurance allows business owners to run their companies without having to worry about unexpected events that can slow them down or bring them to a complete halt. Whether it is water damage from leaking pipes, money lost in transit theft, or a fire at a warehouse, these are liabilities that cannot always be anticipated. Insurance provides you the confidence you need to keep moving with the knowledge that your assets are covered from loss and other legal liabilities.
Unfortunately, with SME insurance penetration levels in the UAE estimated to be around 15-20%, far lower than more mature markets such as the U.K., we see that there are many misconceptions that are holding business owners back from subscribing to these services. The result is that insurance is only considered once the damage is done, or an accident has taken place. RSA is committed to changing this attitude and helping SMEs better understand the value of covering their businesses. With that in mind, here are five important tips that will demystify the process of applying for insurance:
1. Break free of the myth
Insurance is not expensive. As small businesses look to cut the costs of running their enterprises wherever they can, there is a common perception that insurance is too high an expense to bear. The truth is that there are comprehensive packaged business insurance policies that are available in the market for a very reasonable price. SMEs can bundle the right covers for their businesses into one policy and protect themselves against a variety of risks in one package. Under these schemes, a startup can avail policies for an average of AED1,000 per year –less than AED85 a month– while a larger SME business can secure coverage for AED5,000 to AED10,000 per year.
2. Understand the type of insurance you need
Once you realize that insurance is vital and affordable, it’s important to understand what type fits your business’ requirements. For example, if you run a restaurant, business interruption coverage is crucial, but if your company is focused on shipping goods, marine cargo insurance is a more immediate priority. To accurately assess the policies that are required, business owners need to go through a process of deduction that primarily looks at:
Assessing the value of the property and the contents of your business, and classifying them as critical or incidental assets
Understanding your legal limits and liabilities, and noting all perceived and probable risks
Recognizing any mandatory requirements such as workmen’s compensation insurance
While this sounds like a complicated process, insurance companies do not expect you to be able to cover all these areas on your own. SMEs today have the option of speaking to experts and risk assessors who can make this process simpler and provide a more comprehensive understanding of the covers required, in order to help business owners decide which type of insurance is right for them.
3. Growing business, growing insurance requirements
As with any successful business, growth requires owners to broaden the numbers and types of risks they have to manage. Similarly, SMEs need to regularly examine their insurance policies to ensure they are covering the expanding scale of their businesses. To do so, it is recommended that companies get their insurance coverage reassessed on an annual basis, which will allow them to take any potential new liabilities into account. Keeping your insurance agent informed of any and all changes to your business will enable them to recommend the most appropriate additions to your coverage.
4. Look for ways to reduce costs
Another benefit of maintaining a regular dialogue with your insurance partner is that it will allow them to determine potential saving opportunities with regards to your insurance policy. Additionally, business owners should look to keep complete records of their insurance policies, the premiums they have paid, as well as records of losses and recoveries. This information will help them negotiate better terms for their policies in the future. Lastly and most importantly, understand and manage various hazardous risks your business is exposed to, which requires continual maintenance and upkeep. Insurance companies will always reward businesses that manage their risks and will also provide special discounts.
SMEs can also take alternative precautionary measures in order to reduce their liabilities, secure insurance discounts, and lower their premiums. Simple measures like installing fire sprinklers, security systems and/or other safety devices can go a long way.
5. Picking the right insurance partner
While insurance firms have made it simple for SMEs to find and purchase the policies that fit their needs, the right partner can add significant value to a business owner. Agencies that are dedicated to educating their customers, rather than looking for the highest premiums, are the ones you should look to work with.
For example, your insurance agent should not only be able to support you in terms of securing an appropriate coverage plan, but they should also be able to help you navigate the insurance requirements mandated by the free zone in which you operate and the support you can receive from government entities such as Dubai SME. At RSA, we are committed to developing longterm partnerships with our clients and have not only invested in designing a proposition that provides comprehensive coverage for SMEs across sectors, but we also work with them to build the knowledge they need to better protect their companies.
Your business is unique and important to you. Insurance is the key that gives you the peace of mind you need against unforeseeable circumstances and enables you to focus on growing your company.