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Better safe than sorry: Why insurance is a must for SMEs in India

Better safe than sorry: Why insurance is a must for SMEs in India

The administration of a business often means facing all kinds of situations with a certain degree of optimism. This also means planning for problems and situations that could turn out badly - no matter how much one would dislike doing so.

Insurance for SMEs and startups is an important part of setting up contingency plans for issues across the board and managing risk efficiently.

While SMEs and startups are significant drivers of economic growth in a country, many don't have any schemes set up for worst-case scenarios. As per Kapil Mehta, Co-Founder of SecureNow, over 60 million SMEs exist in India. However, a mere 10% to 15% are covered by insurance. This isn't true only for India - a recent study of SMEs based in Alberta, Canada revealed the gap between the need and the implementation of insurance plans. According to the study, 20% of SMEs said they have a formal scheme in place, while another 27% said that they had an informal insurance scheme. 4% of SMEs didn't have a clue about their insurance plan, while 49% said that they didn't have a scheme in place.

With the assistance of the right sort of insurance plan, organizations of all sizes can ensure the protection of their employees and business interests. The choice of plan ought to be made considering all of the different variables, like the nature of the business, the number of employees and the monetary capability of the firm. There are various types of insurance plans and products accessible to SMEs and startups.

While the global average for non-life insurance plans accounts for 3% of the GDP, India's share of the same is less than 1% of the GDP. The COVID-19 pandemic has made some companies mindful of insurance against risks. However, there is still a marked absence of complete understanding of the need for insurance among the majority of SMEs, which raises the risk of problems in business down the road.

Reasons why insurance is a necessity

All organizations face problematic situations - many of which might be beyond anyone's ability to find solutions for. Creating a contingency plan to mitigate and reduce these risks exponentially raises the odds of success.

Accidents are unpredictable and can be extremely expensive:

  • Generally, unexpected instances of clumsy behaviour, lack of focus, or uncontrollable events, which are mostly outside of our control, can disrupt day to day business the most. These mishaps are often very costly for the organization as well.
  • The company could be doing everything correctly, hiring the best team, preparing them well, keeping the office premises cleaned up and in great condition, and yet, something could always go wrong. It's Murphy's Law in effect - anything that can go wrong, will go wrong. This is a part of daily life, be it at home or at the workplace.
  • Additionally, it's not simply an expense for you in cases where mishaps happen on your premises. On the off chance that you cause damage to something that isn't yours or put others in danger, legal fees and remuneration expenses can be exceptionally high.

The right insurance plan often covers you for all of these scenarios, including loss of income during circumstances such as these. If needed, insurance can also be extended to the expenses of required emergency PR communication.

Disaster management and avoiding a loss of productivity:

  • It's not only the actual harm, such as cases of fire or flood that influence your business in the event of an unexpected calamity.
  • The additional loss of business and income is another hit to the company's financial security.
  • The third effect, which isn't as easily quantifiable, is when client contracts can't be closed in a timely manner and the company ends up confronted with breach of agreement claims and unalterable harm to client-company relations. Fortunately, numerous insurance plans may be able to cover the organization for such unfortunate risks.

A well-planned insurance policy will assist with resuming normal business operations faster - reducing the negative impacts of disastrous situations on the company's professional and financial future.

Staying protected in a virtual world:

  • More than 52% of all SMEs were recently hit by digital hacking attempts and the expenses to regain control ran very high.
  • This isn't limited to small companies either. Megacorporations like Sony and Netflix were also hit by cyberattacks in recent years, leading to a loss of confidential company data and highly expensive recovery efforts.

All of these cases show that cybersecurity and digital insurance is something most organizations can't afford to skimp out on.

Frequently Asked Questions

1. What does insurance for SMEs mean?

Insurance for SMEs and insurance for startups essentially acts as protective coverage against mishaps that may affect the functioning of the business. It also acts as legal protection against expenses that may be a result of accidents and other unfortunate occurrences.

2. Do start-ups need insurance?

Yes. As we've covered before, insurance for SMEs of all kinds, which includes start-ups, is a requirement in protecting them against mishaps of all kinds.

3. What insurance should a start-up get?

There are many types of insurance that could be beneficial for start-ups and other SMEs. Some examples are - 

  • Medical coverage for groups - This covers medical expenses and other associated expenses for team members.
  • Insurance for COVID-19 related issues
  • Personal Accident Insurance for Groups
  • Term Life Insurance for Groups

In Closing

As mentioned before, the advancement of SMEs and startups is at the centre of the financial development of a country like India. While this development is the foundation for the growth of the entire Indian business community, a majority of SMEs and startups remain uninsured against risks. The majority of uninsured SMEs don't have a clear idea of how to be insured. This is due to the fact that the channels of communication between insurance companies and SMEs aren't well developed. This needs to change, and better health benefits along with insurance for SMEs and startups is the way toward India becoming a true "superpower" in every sense of the word.

Schedule a demo to learn how your organisation can get the best employee health and well-being experience with ekincare's commitment to quality.

Aditya Prakash Swain is an adaptable and dynamic Digital Media Consultant responsible for content marketing strategy, conducting thorough research on industry-related topics, generating ideas for new content types and enhancing brands digital presence.