Undoubtedly, Small and Medium Enterprises (SMEs) are a prominent growth factor of India’s economy. This sector includes a copious amount of industries, from education and food to manufacturing and IT, to services – each contributing dynamically in the growth of the economy.
The SMEs sector, not only creates a gigantic platform for employment opportunities, but even maintains the balance by bringing industrialisation to the backward areas (20% of Small and Medium Enterprises are operational from the rural and backward regions).
Current statistics of the SMEs in India
1. Estimated number of SMEs in India- A colossal amount of 42.50 million enterprises including registered & unregistered are there in India. It includes a total of 95% of all the working units.
2. Employment opportunity- The sector employs 40% of India’s working population itself which means about 106 million people.
3. GDP contribution- SMEs offer approximately 6.11% of the manufacturing and 24.63% of the service sector.
4. Growth rate- Small and Medium Enterprises has maintained to grow by 10% in the past few years. It is expected to grow by 8% in the coming years.
5. Exports- It has managed to contribute to the exports by 40% of the total amount.
A small business owner has a lot of responsibilities on their plate including interpersonal management, marketing & advertising, sales and so on. It may be a little overwhelming to manage the workflow at first. Consequently, it’s vital to follow the trend and know about the massive impact of changes or growth in the industry.
Some challenges in the SME insurance market
Small businesses, often bootstrapped, face the challenge of limited resources – financial and human capital. Often owner-driven and built of small teams, they do not have competent human capital with expertise in all aspects of a business.
Outdated approach to insurance planning
SMEs’ insurance buying habits and behaviors have not changed much over the years. Rather than considering each risk and securing each aspect of their business, they still look at the business as a whole. SMEs are also better prepared to visualize and assess short-term risks and losses but are not prepared to deal with long-term risks.
Low acknowledgement for insurance
There is generally a low acceptance for the fact that a business needs insurance. The lack of understanding of the benefits of having business insurance, absence of proper guidance on the inherent abilities of insurance and how it can be integrated in the business growth and success.
Changing dynamics of risks
The evolving dynamics of risks the SMBs are exposed to make it difficult for insurers to predict the risk and suggest solutions. As SMEs become more layered, involving multiple parties; as they expand and grow functions, their risks become complex, too.
Let’s look at how some of the key risks and insurance plans for SMEs.
Cyber Liability Insurance
Risks involved- The older the equipment, the more it is prone to an attack. And, also marking the software update with “not now” or “remind me after a few days” is not the best option for the long run. It can lead to significant costs or total loss of data. Remember the hackers are always looking for loose ends. Once the attack is in movement, only a professional can find out the source and fix the problem.
Insurance- Cyber Liability Insurance
Coverage- Cyber liability insurance will cover a business from data breach in which the customer’s private information like their Social Security number, the credit card number is stolen or disclosed by the hacker.
Group Health Insurance
Risks involved- Certain accidents are inevitable. There is always a possibility that a member working in the company gets injured or hospitalised due to the working conditions.
Insurance- Group Health Insurance
Coverage- A Group Health Insurance Plan provides coverage to all the members of the company. The cost is reduced because it spreads all across the policyholders.
Errors & Omissions Insurance
Risks involved- To explain it with an example, an employee of your company loses an important piece of document. Further, it leads to revenue loss or even worse, the client may sue the company. Recovering from such losses can cause trouble in business growth.
Insurance- Professional Indemnity Insurance (Errors & Omissions insurance)
Coverage- The PI insurance will cover all the legal expenses associated and the settlement costs.
Changing Insurance perceptions
To meet with the changing risks in the SMEs industry, the insurance companies and brokers are changing and aligning their offerings to their clients according to their needs. One of the key solutions would be to make products that are relevant to the market and the individual customers. For this, it is essential to have a thorough understanding of the customer profile, customer’s business performance, past behavior, industry trends, industry and business specific risks. Brokers and companies will have to invest time, effort, resources and funds into strategically planning such an ecosystem.
Wrapping Up Our teams of experts at PlanCover will let you understand the complexities of Small and Medium Enterprises and how you can overcome a bad experience with the help of insurance.