Privately owned businesses face unique risks that not only impact the business but also endanger livelihoods of the owners and their families. However they do not have the luxury of large corporations to set up governance departments with an army of people. SME owners must be vigilant in understanding and addressing their main business risks.
How can insurance help SMEs?
Insurance is a way to manage risks by transferring the risks to an insurer. It enables SME to protect their assets, people and cash flow to weather any incidents in order to continue operating a successful business.
What insurance do SMEs need?
All SMEs will have three areas in common that have to be protected:
Property insurance protects the value of the physical assets owned by the business from unforeseen accidents or natural disasters. This is applicable to both owners and renters of commercial officers or buildings, for businesses that have valuable property such as machinery, computers, equipment or tools, or keep inventory and stocks.
Types of coverage:
Fire - which also extends to include lightning or flood
Business interruption – covers lost revenue or the expenses incurred in the event of suspended operations due to damage from a fire or flood
Theft - in the event of burglary
In Singapore, there is a statutory obligation to purchase Work Injury Compensation insurance (WICA) cover for all manual workers and for non-manual workers with a monthly salary up to S$2,100. It covers employees for work-related injuries or diseases, including their medical expenses, medical leave wages and lump sum payments for permanent incapacity or death.
All businesses have the risk that it can be held liable for compensation due to acts of negligence in the course of its business operations. There are three main insurance policies that cover the majority of risks associated with a company’s legal liability.
a) Public Liability
This covers the costs incurred from third party property damage and bodily injury incidents resulting from business operations, manufacturing, distribution or sales of the company’s product. This insurance also covers the legal fees incurred whilst defending against the covered lawsuits.
b) Professional Indemnity (PI)
This protects businesses that provide professional advice and services, and their legal liability arising from acts of negligence. The insurance covers the cost of damages from lawsuits from dissatisfied clients.
c) Directors & Officers (D&O)
This insurance provides protection for the personal liability of directors and officers of a company whilst performing their roles as directors and officers. It is purchased by the company for the benefit of their directors and officers to protect them if they are held liable for breach of duty or negligence.
How to get covered
Most insurers offer an SME package which covers Property, Business Interruption, WICA and Public Liability. PI and D&O are usually sold as standalone covers.
Anapi believes in providing our businesses with the best tools to manage insurance using data. Our software benchmarks your policies against similar companies in your vertical and gets quotes from multiple insurance carriers specialised in SMEs to present you options for cost effective coverage.