Many SMEs underinsured, taking on unnecessary risks
Low awareness, limited bandwidth and cost are among factors hindering take-up. SMEs can manage risks better with insurance, say roundtable panellists.
ROUNDTABLE PANELLISTS:
From left: Lester Wee, account manager at Brian Mae; Jack Ho, owner of The Flying Squirrel and Goh Shun Quan, head of underwriting, retail and SME at QBE Singapore.
Moderated by Joan Ng, The Business Times
A RECENT survey by insurer QBE Singapore found that many small and medium-sized enterprises (SMEs) are underinsured. The Business Times examines this issue through the lens of insurer, agency and business owner.
Q: What do the statistics show about the take-up of risk insurance for small businesses?
Goh Shun Quan: Every year, QBE conducts a survey of Singapore-based SMEs. This year’s edition – our ninth – surveyed over 600 SMEs. We found that while the percentage of SMEs experiencing at least one business issue decreased – from 88 per cent last year to 72 per cent in 2024 – they nonetheless highlighted multiple business risks, new and old, encountered over the past 12 months.
During the year, 24 per cent had sensitive data and information stolen over the Internet and 19 per cent experienced loss of income due to business interruption. Such issues are insurable, yet 9 per cent of the SMEs surveyed did not have insurance.
These uninsured businesses will need to fall on other risk management strategies for protection in the event of an unfortunate or unforeseen incident. Sadly, many do not have the financial means to cover their losses in the event of a risk incident occurring – and will likely go out of business.
Q: It would seem SMEs lack awareness of the risks they face, and are often underinsured. From the perspective of the business owner, why is this?
Jack Ho: Small business owners like me typically have to manage all operational aspects. While important, insurance is not part of our daily agenda. In the food and beverage industry, we are constantly concerned with ensuring supplies arrive on time, menu creation, human resourcing matters and making sure our premises are clean – our priority is making sure our customers have the best experience.
We’re also concerned with marketing, technology and financial issues – all three can also be heavily time-consuming. Insurance is something we typically only think about once a year, when our policies are up for renewal.
Other areas that are daunting for us include applying for policies and making a claim. Insurance policies tend to use a lot of industry terms, which can be highly confusing for people like me, who don’t work in the insurance business. Regarding claims, fortunately we haven’t had to make any. But having never made one before, the thought of making one is also quite daunting.
Q: How is QBE responding to these challenges faced by SMEs?
Goh: We work with our intermediaries to share risk management best practices with our SME clients. These offer guidance not only on ongoing risks, but emerging risks, too. We recently created a risk toolkit to help F&B startups identify their business risks, for example, and help them develop risk mitigation strategies.
We also work with risk surveyors and loss adjusters before and after a claim is made. We survey the insured’s premises to understand the risks, and provide valuable inputs and risk improvement suggestions to our clients.
Q: What is the typical response of potential clients upon hearing of these risk management best practices?
Lester Wee: Some will focus solely on price, while others will ask how best to cover all aspects of their businesses without mentioning price at all. Some customers will ask for specific types of coverage for certain areas of their businesses, while others will provide various claims scenarios and enquire about policies that may cover these areas.
Many also mention policies that friends and industry peers have taken out before, and enquire whether these are available to them.
Q: What advice do you give them in response?
Wee: Regarding price, we can’t guarantee that we are the cheapest; but we will do our best to align the business owners’ needs while bringing the cost down and providing the best value in terms of coverage and sound advice.
Very often, business owners get too caught up with comparing quotes – such that even if an insurer provides a wider and more comprehensive coverage but at a slightly higher premium, they will tend to go with the cheaper option.
It is also worth noting that besides upfront coverage, after-sales service in the form of claims assistance and answering post-sales questions promptly are equally as important.
Q: Reflecting on your experience running The Flying Squirrel, what ultimately convinced you to take up the insurance you currently have?
Ho: Running a business takes a lot of time and energy. The last thing people like me want to worry about is a money issue, in the event an incident happens that we are not appropriately insured to cover.
Our aspiration to be a responsible F&B business was also a driving factor. Restaurants like ours have a duty of care to look after customers, and we take this responsibility seriously. We also have a duty of care to look after our staff. The peace of mind I refer to doesn’t just apply to management, it also applies to our employees. Staff need to know that in the event that they are injured, we have them covered.
Q: Any last words for business owners?
Goh: Unfortunate and unforeseen incidents can disrupt SMEs’ operating budgets, as they could be required to raise funds to sustain their business after loss and damage. Insurance can provide timely cash payouts for raw material and machine replacements, rentals of temporary premises, property reinstatement and compensation.
Interested in our SME protection plans? Get in touch to find out more.
This article was first published in The Business Times, on Thursday 18 July 2024.