Economic Times (ET): Why do businesses, especially SMBs, need insurance?
Rakesh Kumar (RK): As a small business owner, I understand the vital importance of insurance in the daily operations of my venture. Insurance serves as a protective shield for small and medium-sized businesses (SMBs) like mine, and there are several compelling reasons that make it a necessity.
One of the most significant benefits of business insurance is the financial protection it offers. In the event of unexpected events such as natural disasters, accidents or legal liabilities, insurance can help cover the costs, preventing severe financial setbacks that could otherwise cripple an SMB.
Many types of insurance, such as workers’ compensation and liability insurance, are often legally required. Failing to comply with these regulations can lead to hefty fines and even legal actions against the business.
Business operations inherently involve various risks. Insurance helps mitigate these risks by providing coverage against property damage, theft or even data breaches. It allows me to focus on my business operations without constantly worrying about potential mishaps. Insurance such as health and workers’ compensation benefits not only protect your employees but also boost their morale, making it easier to attract and retain talent.
Insurance can play a crucial role in ensuring business continuity. For example, if a fire damages your premises, property insurance can help you get back on your feet faster by covering repair and replacement costs. In essence, insurance is not just an expense, it’s an investment in the longevity and stability of your SMB. It’s a safety net that provides financial security, legal compliance and peace of mind, all of which are indispensable for the growth and success of small and medium-sized businesses.ET: What are the different types of insurance every business must look to buy?
RK: As someone who has firsthand experience with the volatile business environment in India, I can’t emphasise enough the importance of having appropriate insurance coverage. India’s varied climate has its advantages and disadvantages. Property insurance is essential to protect against damage from natural calamities, including the destruction that monsoons may cause to properties. I recall a fellow businessman who lost a lot of money when his manufacturing facility was flooded because of heavy rains as he didn’t have property insurance.
The other insurance that is important in a litigious society like India is liability insurance. Legal problems could arise as a result of a customer slipping within your shop or a faulty product. Liability insurance can pay for the cost of legal defence and settlements, protecting your company.
India’s workforce is a big asset. Not only is offering health insurance to employees a legal obligation for bigger firms, but it is also a wise business decision for SMBs. I have witnessed how this can increase staff loyalty and morale. Health insurance can be a useful recruitment and retention tool.
A professional liability insurance is essential for service-based enterprises. It safeguards against accusations of negligence or broken commitments, particularly when offering consulting or advice services. Similarly, commercial vehicle insurance is essential if your company uses vehicles, whether for delivery or for transit.
As India quickly goes digital, cyberattacks are a serious concern. It is crucial to safeguard your company from data breaches, hacking and other cyber hazards. In these situations, cyber insurance can act as a safety net.
Besides health insurance, providing extra benefits like life insurance or retirement plans might help your company attract more candidates. These perks may improve staff retention and happiness. Similarly, key person insurance for the owner or a key employee frequently assumes a crucial role in smaller businesses. It ensures that if the key individual cannot work because of illness or injury, the firm may continue to run and debts can be paid.
ET: India has a large number of SMB exporters. Why should they look at marine insurance and what are the things they need to keep in mind when buying marine insurance?
RK: I am privy to the crucial role that marine insurance plays in providing a seamless and secure experience with international trade, after venturing into the realm of small and medium-sized business (SMB) exports in India.
Exporting commodities over international borders is subject to a number of dangers, including those related to theft, natural catastrophes and transit damage. Marine insurance serves as a barrier, making sure that these risks do not result in losses.
Marine insurance may be required by law in certain circumstances. Many purchasers demand insurance from sellers to protect the products until they arrive at their destination. Missing out on these standards may cost you business prospects.
One must, however, consider certain factors while buying marine insurance.
SMB exporters should choose the best marine insurance policy type based on their unique requirements. Options include ‘open policy’ for frequent exporters and ‘voyage policy’ for lone shipments. For each cargo, when we first started exporting, we chose single voyage policies. We switched to an open policy as our exports increased because it was more convenient and less expensive. Understanding the scope of the policy’s coverage is important. We made sure it includes both domestic and foreign transit.
Then comes the declaratory statement of value. It’s important to truthfully state the value of your goods. Overestimating could result in higher premiums, while underestimating might leave a gap in the event of a claim. We overestimated the worth of the products in an early shipment, and as a result, when they were damaged, I got a lower claim reimbursement than I had anticipated. Since then, I’ve realised how crucial precise appraisal is.
Carefully read the policy statement to understand what is not covered. Some plans might not cover particular products or risks. I once believed my marine insurance would cover a shipment of perishable products, only to find out it didn’t.
Marine insurance not only defends against unforeseen difficulties, but also builds your reputation on the international market. However, it’s crucial to pick the appropriate insurance, comprehend the coverage, and pay careful attention to the needs of the policy.
ET: There is a growing threat of cyberattacks. How can cyber insurance prove beneficial and what does it cover?
RK: We must all face the growing threat of cyberattacks, and cyber insurance is a crucial weapon in this fight. Cyberattacks might cause significant monetary losses. Our e-commerce site was the target of a ransomware attack a few years ago. Our company’s operations ceased, and we had to spend a lot of money to get our data back and come online again. Cyber insurance was crucial in covering these costs and sparing our finances from suffering a serious blow.
There are also legal and regulatory compliances. Because of the growing emphasis on data protection, firms must comply with a wide range of laws. But, it is important to know what is covered by cyber insurance.
Cyber insurance often pays for the expenditures incurred because of a data breach, including contacting impacted parties, using credit monitoring services, and attempting to restore trust through public relations. This coverage can be a lifeline if a data breach exposes sensitive client information.
When addressing ransomware attacks, our coverage on extortion and ransomware can be a game changer. It frequently covers costs related to discussions as well as payments for ransom demands. Also, financial damages resulting from business interruptions brought on by a cyberattack may be covered with the aid of cyber insurance.
If a cyberattack results in legal claims, cyber insurance can pay for settlements and the expense of legal defence. In the litigation atmosphere that might surround data breaches, this coverage is essential. Also, following a cyberattack, an effective public reaction is crucial. Access to crisis management and public relations specialists is frequently made available through cyber insurance, assisting in preserving the good name of your company.
However, we must consider some additional factors as well. Just like with any insurance, deductibles need to be considered. The secret is striking the ideal mix between a modest premium and a respectable deductible. Also, before approving a policy, insurers frequently evaluate your cybersecurity controls. Strong security measures might result in more favourable coverage conditions and reduced rates.
ET: In today’s age, where buying and selling of insurance products have taken the digital route, how do you stay relevant?
RK: Maintaining relevance in this constantly changing environment, where the insurance sector has embraced digitalisation more and more, has become both a challenge and an opportunity. As someone who has experienced this shift, I have discovered that creativity and adaptation are essential for surviving the competition.
In this digital age, it’s crucial to embrace technology if we want to remain relevant. I’ve observed this in action, for example, through the spread of user-friendly insurance apps. Customers may easily view their policies, submit claims, and receive immediate support thanks to these apps. They improve the total client experience.
Personalisation is a crucial component of relevance. With the abundance of data at their disposal, insurers can now customise goods and services to meet customer needs. Insurers are now utilising data analytics to comprehend client behaviour and preferences, allowing them to provide more specialised insurance.
Another way where insurers may stay current is by streamlining the claims processing process. The amount of time needed to resolve claims can be greatly decreased via automated methods and digital claim processing.
Customers today are interested in sustainability. Sustainability-focused insurers are more likely to be viewed as relevant and forward-thinking because they support eco-friendly policies and provide coverage for green activities.
ET: What does Square Insurance Brokers provide and how are you different from others? How was business last year and how does it look this financial year?
RK: Our approach combines data analytics and state-of-the-art technology to provide our clientele with contemporary, tailored insurance products and services that meet their ever-changing needs. Square Insurance is unique in the insurance market because of the range of services it offers. We provide a range of commercial and life insurance plans designed for people, families, and companies.
Because of our exclusive access to a large array of insurance providers and products, as brokers, we are able to offer our clients a multitude of choices. We are able to provide insurance solutions that are affordable and suit the demands of every client.
Last financial year, we clocked revenues of Rs 160 crore, and this year we are gunning for Rs 300 crore.
