Wilma van der Walt, an executive for customer experience and operations at PPS Short-Term Insurance
Entrepreneurs are successful precisely because they take calculated risks. It is these risks that could make or break a small or medium enterprise (SME). The many reasons why SMEs – the lifeblood of South Africa’s economy and job creation – are failing, are well publicised. The one least spoken about is the lack of business insurance.
More than 90% of South Africa’s businesses are small businesses. Trade and Industrial Policy Strategies (TIPS) – an independent, non-profit, economic research institution, found in research done in 2017, that small business provides 55% of formal employment in the country. So, if these businesses fail, it has a massive impact on the country’s unemployment levels and thus the country’s economy.
A survey by research company BeyondCovid revealed that 62% of the small businesses that were looted and damaged during last year’s riots in Gauteng and KwaZulu-Natal did not have appropriate insurance in place. As a result, there is little to no chance for such businesses to recover financially from this incident.
Companies that had insurance in place that were targets of the violent riots, claimed R34 billion in damages from The South African Special Risks Insurance Association (Sasria), the state-owned non-life insurer that provides cover against special risks such as strikes, riots and public disorder. This number should be a good indication of the need for proper business insurance, especially for SMEs as they face many challenges.
A question that comes to mind is whether the insurance industry is equipped sufficiently to assess SMEs’ business risks and develop appropriate products. There is no doubt that businesses need appropriate business insurance as this will help cover the costs like the loss of income due to incidents like a cyberattack, storm damage to property and various liability claims as to mention only a few.
One may think that cyberattacks are only aimed at large businesses, but with almost everyone having a digital footprint, largely due to the COVID-19 pandemic, SMEs face huge risks of cyberattacks. Without the appropriate business insurance that includes cyber insurance, business owners will have to pay out-of-pocket for costly damages and legal claims against their company.
Our observation is that most SMEs are not aware of the different business insurance products in the market while others are aware but do not prioritise this insurance cover as they try to keep operating costs at a minimum. One of the key considerations when choosing the right business insurance cover is to ensure that you choose a service provider that knows the business risks associated with your industry.
For example, at PPS our focus is on the professional that provides a professional service such as healthcare, legal and accounting services. In the dental and medical profession, the technology investment and maintenance of the latest equipment are extensive and should these be damaged. It could have a crippling impact on a professional’s practice should anything happen to this.
Other firms – like a legal practice or an accounting firm – can lose items such as office furniture and computer equipment. Following the July riots**,** PPS Short-Term Insurance was able to assist numerous of our professionals who have a PPS commercial lines business policy and were affected by the riots to claim from SASRIA.
The business insurance industry can play a role in helping SMEs grow and thrive. With more product knowledge and appreciation of business insurance cover, business owners can safeguard their assets by purchasing a policy that covers their specific business risks.
These may include anything from business vehicles to building contents and indemnity requirements as a professional. Business insurance is, in many ways, the silver bullet to sustaining SMEs. It is, therefore, up to us, the insurance industry, and the brokers/advisers that we work through, to ensure this sector is sufficiently covered.