Small and Medium-sized Enterprises (SMEs) play a pivotal role in the Indian economy and are aptly called India's 'engine of growth'. If one simply looks around, they would witness a silent SME revolution happening in India. Right from local general stores, local family businesses, to medium-size businesses, SME's have been on the rise and have slowly and steadily becoming the backbone of the Indian economy. However, in spite of the remarkable growth that it has showcased in the recent years, the SME industry faces a number of challenges that hinder it from reaching its full potential.
One such challenge is its vulnerability to uncertainty or unpredictable events such as natural calamities, riots, etc. SMEs lack the luxury of resources and financial muscle to quickly recover from unforeseen events that large companies possess. SMEs are mostly entrepreneurial ventures where the promoter has invested his lifelong savings or borrowed exorbitant amounts of money from creditors. Therefore, without the financial security of insurance, the possibility of a natural calamity, riot, political unrest, or any malicious act can leave question marks on the bare survival of the organization.
In spite of this scenario, the subject of Insurance often brings out an indifferent response from SMEs. Most consider it a superfluous expense forced upon them by banks, while others view it as an expense which is more of a luxury rather than a necessity. Lack of insurance awareness, price sensitivity, and trifling profits makes insurance the last priority for SMEs.
Insurance instills confidence in SMEs so they can focus on their business activities with the knowledge that their assets are covered against any uncertainty. It empowers companies to function without bothering about probable losses or legal liabilities. Still not convinced about the importance of SME Insurance? Let’s breeze through a list of reasons on why SME Insurance can be a game-changer:
- Securing company resources: Ensuring the safety of assets such as property, equipment, automobiles, inventory, and computers against unforeseen events such as fire or floods is essential for any company. It would be penny-wise and pound foolish to let the cost of an insurance premium outweigh the security of business assets.
- Safeguarding your employees: Employees are the most valuable assets of an organization. Therefore, insuring their health is crucial for any organization big or small. In addition, as per Worksmen’s Compensation Act 1923, employers are obligated to provide compensation to employees in case of job-related accidents or death.
- Protecting from Legal Liability: We live in a society where legal disputes are a common affair. For a small business, a single lawsuit is enough to wipe out their entire capital. A single accident, contract breach, irritated employee is all it takes to shut up shop. The best case scenario of winning the legal battle can also take down an organization as the legal expenses would burn a hole in the finances of the company.
- Keeping Business Interruption expenses at bay: Covering assets and employees against natural calamities and malicious activity is one thing. But what about the loss of potential business during the period where the company remains closed? SME Insurance can also cover loss of income for the time the business operations are halted playing a big role in helping the organization survive.
- Offering Credibility: Apart from security, SME Insurance brings to the table the tag of being a credible business. Prospective or existing clients are more confident to do business with an organization knowing that the organization is prepared for unforeseen circumstances or uncertainties. Insurance establishes a company as a safe bet.
To sum up, in spite of the rise of SME insurance products and the flexibility of customizations available, insurance is still an under-penetrated product in the SME sector. It’s safe to conclude that insurance is absolutely critical especially for the SME industry and it can offer peace of mind needed to keep small and medium businesses in business.