By: Jacques Pienaar, head of commercial underwriting at King Price Insurance
Finding the right insurance shouldn’t be one of them, and brokers play an invaluable role in ensuring that SMME risks are properly covered
According to data from the UN, micro, small, and medium enterprises account for over two million companies in South Africa and represent more than 98% of formal business. The Brenthurst Foundation reports that these enterprises are responsible for employing 50-60% of our labour force and contribute 34% towards GDP. And yet, South Africa has a higher failure rate of SMMEs than elsewhere in the world, with about 70-80% of our small businesses failing within five years.
While the bigger-picture risk factors – like the impact of loadshedding, the devalued Rand, increasing fuel prices, interest and inflation rate hikes, high unemployment, the fallout from extreme weather events, and cybercrime – are largely out of our control, brokers play a critical role in ensuring that business owners get the right cover to future-proof their businesses as far as possible. Globally, we see that the most business insurance claims are for fire and explosion, natural catastrophes, and faulty workmanship. However, in South Africa, we have different risks, and so business owners need more specific insurance products.
The top reasons for the business insurance claims that King Price sees are:
- Theft.
- Power surge.
- Storm damage and lightning strike.
- Faulty geysers and water damage.
- Fire.
- Accidental damage.
Added to this, brokers should ensure that their SMME clients consider the following risks:
Working from or at home
If your clients or their staff members have equipment at home that’s owned by the company, and which is used to do business on the company’s behalf, then it’s up to the company to insure that equipment. However, some companies may hold their staff liable for loss or damage under certain circumstances, and advising your clients that such information must be clearly communicated in the company’s employment contract or IT policy is great added value from you. In the case of a business that’s entirely run at a client’s home, the equipment and stock should be covered under a business insurance policy, and not included in a personal insurance policy.
Public and employer’s liability
Business owners need to protect themselves and their businesses against liability for injury to third parties, as well as for loss of, and damage to, their possessions. They also need cover for any legal liability following injury to an employee that happens in the course of, or in connection with, their service.
Buildings and equipment
At the very least, small business owners should insure their physical buildings as well as their essential assets and equipment against fire, theft, accidental damage and breakdown, and losses due to business interruption.
Vehicles and goods in transit
Commercial motor insurance protects company-owned cars, vans, and trucks in the event of accidents and theft. If your clients’ employees use their own cars for business purposes, then these vehicles need to be covered for business use as personal insurance won’t necessarily cover them if an incident occurs while they’re on the clock. And, if a business transports materials or products, then goods in transit cover is essential.
Cyber insurance
Cybercrime has become one of the biggest risks to business survival for South Africa’s SMME sector. The IBM annual Cost of a Data Breach Report shows that breaches have cost local companies an average of over R49 million each, yet many businesses still ignore the threat. A good cybersure policy works alongside with IT security protocols and practices, to limit the damage and get businesses back on their feet in the event of a cybercrime incident.
Public disorder and riots
Sasria is the only short-term insurer that provides cover against extraordinary risks such as civil commotion, public disorder, strikes, riots, and terrorism, which are not covered by ordinary insurers. Sasria cover can usually be bought through an insurer as part of a business insurance policy, but it can also be procured directly from Sasria.
There’s no doubt that South Africa’s current economic climate is challenging, with unique risk factors that combine to create an (im)perfect storm for SMME business owners who haven’t dotted all the Is and crossed the Ts. At King Price we know that no two businesses have the same insurance needs and that’s why we only insure commercial risks through our broker partners. We truly value our relationships with our broker partners, and we rely on your specialised expertise to lead your business, engineering, agri, and community clients – both large and small – to make informed insurance decisions.