Lana Ross, Chief Operating Officer of Discovery Business Insurance
Lacklustre economic performance, business interruption due to lockdowns, political instability and changing consumer behaviours are the perfect storm, creating a challenging environment for businesses. Although this is an environment ripe with opportunities for innovation, many SMEs were the hardest hit by the pandemic, and 70% of SMEs report that they have had to cut back on business spending to survive.
Even before the pandemic hit, South Africa had one of the highest failure rates of new SMEs in the world, with five out of seven businesses failing within the first year. In a challenging environment, small operations often have to cut back on spending and may be tempted to cut back on their business insurance. This is because companies typically look for ways to save money during difficult times, underestimating their risk exposure and insurance needs. There may also be a knowledge barrier – in other words, business owners are not always sure what cover they actually need, misunderstand what’s available to them or make the assumption that they don’t need a specific kind of cover. However, having sufficient insurance and attending to risk mitigation are two critically important areas that should not be neglected especially during a challenging environment when the business would find it difficult to recover from a loss event.
Broker advice is invaluable
To help businesses avoid underinsurance, Discovery Business Insurance advocates selling insurance through brokers. The expertise of brokers can help to avoid pitfalls while making sure that businesses are purchasing enough of the right cover. Brokers understand a business owner’s needs based on the nature of their business, as well as the ever-evolving landscape of risks they face today. Risk exposure typically changes and brokers know when and how to plug the gaps in order to avoid underinsurance challenges, especially when it comes to intangible risks.
Tools to help businesses owners understand their business risks
It is important for prospective business insurance clients to undergo a risk assessment by a competent risk assessor to identify any risk blind spots that may exist. These processes are helpful in ensuring that clients are adequately and appropriately insured, as well as in reducing or managing risks where possible. To help clients get a holistic view of their business risks, the insurer can provide access to business diagnostic tools that provide clients with insight into their intangible business risks. Such tools can assess the business health in various areas such as operations, finance, human capital and sales.
Access to service providers to help the business grow
A useful output of such business diagnostic tools is the business score as well as recommendations on areas of improvement. For additional value, the insurer can link the business to service providers that can help them improve and grow. For example, Discovery Business Insurance offers clients access to service providers at discounted rates.
By providing access to sector-specific technological tools to ensure smooth and efficient operations, blind-spots can be eradicated, businesses have a clearer understanding of their own performance, and have a far greater chance at real sustainability in growing South Africa’s economy.
Insurance must be tailored to the business needs
Innovative product suites help to pave the way for SME-owners, along with personalised advice from a specialised source and products tailored to the specific business needs.
A key focus of Discovery Business Insurance has been to educate businesses about the many unique risks that they face while simultaneously supporting their ambitions regarding specific attention to their bottom line. We have also made effort to provide cover for the emerging risks of today, such as cyber-security.
The above measures assist the business to get the most appropriate cover at an affordable cost. This can provide much-needed support to SMEs, helping them to survive a challenging business environment or an insured event.