A significant number of establishments in the building materials space are small and medium enterprises. Thanks to the government’s drive for creating SMART cities all across the country, the market size of this industry is set to grow exponentially. But growth in business also results in growth of liabilities and risks.
According to a FICCI-KPMG report, only 10% of employees of SMEs have health cover, and only 0.1% of other core property risks like fire, marine etc. are covered.When these businesses do not take adequate measures to protect themselves, one can assume that India’s SME space is prone to various types of risks. These risks can have a colossal impact on the existence of several ventures.
Businesses can cover their risks by purchasing insurance. This will ensure protection against liabilities arising out of burglary, fire, material damage, riots, storms, floods, damage of mechanical or electrical appliances, dishonest employees or legal cases. Some of the specific types of insurance that businesses can avail include:
There are several other benefits of insuring an enterprise, including:
To enjoy the above benefits, it is important that due care is taken when purchasing insurance for businesses. To begin with it is important that valuation of assets is done correctly so as to have adequate insurance. Many a times businesses tend to submit a lower insured declared value to reduce premium, thereby resulting in underinsurance. This would translate into additional costs to be borne by the company in times of crises.
In case of marine and health policies, it is important that timely declarations are made about the content of shipment and pre-existing diseases to ensure that a claim is not rejected on technical grounds due to a mis-declaration. Equally important is keeping a proper record to establish cause and insurable interest. Failing to do this could result in a rejected claim.
It is important to understand that no insurance provider will cover willful negligence. The insured company must take all reasonable steps to control losses arising from unforeseen circumstances. Failing to do this will result in at least the claim against the avoidable loss being rejected. Equally important is to report the claim as soon as a loss occurs, and co-operation with the surveyors. This will allow the process to be completed quickly, and surveyors will be able to get all the evidence they require.
Business cycles are uncertain, yet the protection of an enterprise can be certain. The cost of indecision may be substantial if a business owner dithers about insuring his business. One can begin by assessing the value of items to be insured as it will offer a better perspective of the coverage that is required. With several commercial insurance options available in the market, it is important to determine the right fit. Being aware of the fine print and understanding how servicing and claim settlement works is critical before finalising an insurance plan.
The author is chief underwriting officer at Bharti AXA General Insurance. Views expressed herein are personal.