Though small and medium enterprises (SMEs) have been the spine of financial progress and improvement, greater than 50% of these within the nation stay uninsured. That is reasonably alarming, particularly in comparison with what is going on in Europe and different Western nations, says AXA Affin Basic Insurance coverage Bhd CEO Emmanuel Nivet.
He factors out that the majority Western nations have guidelines and rules that govern SMEs. For instance, if an organization desires to deal or commerce with a 3rd social gathering, it’s required to buy legal responsibility insurance coverage. Evidently, this requirement is absent in Asian nations.
“For instance, in the event you carry your garments to the laundromat in Malaysia and one thing occurs, probably the most they will do is express regret and reimburse the price of the laundry service. Whereas you might be by no means left identical to that when coping with firms with legal responsibility insurance coverage. As an alternative, they clarify what occurred and reimburse you the price of your garments,” says Nivet.
This doesn’t apply to greater firms as a result of these firms perform international buying and selling actions, he provides. “For example, Petroliam Nasional Bhd (Petronas) has an enormous legal responsibility insurance coverage programme as a result of it offers with the world.”
Nivet attributes the low protection price amongst SMEs to a lack of expertise of the necessity for insurance coverage and the Asian mentality, which doesn’t prioritise danger. Having labored within the business for 35 years, with important expertise in underwriting, he factors out that businessmen are likely to focus extra on the joy of opening a brand new enterprise than fascinated by the dangers that go together with that individual enterprise. “We perceive that a businessman will take a look at the optimistic aspect of issues and never take a look at the 90% of the iceberg that’s not seen,” he says.
SMEs contemplating insurance coverage to guard themselves towards such eventualities ought to take the next steps.
1. Threat mapping
Determine your dangers, says Nivet. Relying on the character of your organization’s enterprise, these might be as a consequence of provide chain points, pure disasters, publicity to explosions if coping with extremely flammable liquids or bodily accidents in case your staff work in doubtlessly harmful conditions.
In particular circumstances, you must insure towards the lack of expertise. For example, for a high restaurant in Kuala Lumpur, the lack of its head chef can be a serious danger that would influence the corporate’s backside line.
2. Threat evaluation and mitigation
After you’ve mapped out the potential dangers, you must assess how a lot every of those is value. After figuring out the price to the corporate in any of those eventualities, you must take steps to mitigate these dangers. For example, if your organization’s dependence on one provider is a trigger for concern, you need to in all probability discover various suppliers to cut back your dependence, says Nivet. Then, if one thing occurs, your organization can be in a greater place to handle the state of affairs.
three. Threat retention
After getting carried out all you possibly can to mitigate the dangers you’ve recognized, what you might be left with is the dangers you possibly can neither management nor handle. At this level, you must consider how a lot of a loss you possibly can take. For instance, an SME might be able to handle losses of as much as RM5,000. This is named its “danger retention”, says Nivet. The chance of something above this restrict must be transferred to an insurance coverage firm.
four. Threat switch
This brings us to the final step of the method — dangers that can not be absorbed internally and have to be insured towards. These embrace pure disasters resembling floods and earthquakes. This relies on the character of the enterprise. For example, a meals and beverage firm must insure towards potential product contamination whereas this might be irrelevant to a producing concern. The scope of protection additionally relies on the placement. For instance, an organization located on excessive floor wouldn’t need to insure towards floods.