One of the duties that an entrepreneur must undertake is to study how to protect the heritage that has been built with the company. This patrimony is generally represented in assets, but it is frequently also represented in its reputation within the market. The protection of this heritage is not a small matter and the task can be a bit complex if some basic concepts of risk management are not taken into account. Lets know the importance of insurance for SMEs here.
Despite the fact that insurance intermediaries, that is, insurance brokers, agents and agencies, are experts in risk management and are invaluable help for the entrepreneur when acquiring the protections available in the market, it is worth knowing some principles of insurance and its importance for the company.
Let’s start with some insurance basics that are not always known and understood by policyholders. Insurance is a mechanism by which risk is transferred to an insurance company. This transfer has a price known as the premium, which is the value of the insurance. This value is a fraction of the value of the asset or the insured value.
Insurance is also a contract whose terms are listed in the policy. It is there where the conditions for the transfer of risk to the insurer are set forth. The policy also includes the obligations of the insurer and also the insured. Knowing the policy allows you to contrast the protection needs of the company with the chosen product.
Catastrophic risks are those whose manifestation can take the company off the market. They may vary according to the type of company, but there are some that have this categorization in an important part of SMEs, among them those of natural origin such as earthquakes and fire.
It is important to note that insurers are obliged to provide the information required for the employer to understand the insurance he is purchasing, despite this, it is recommended that he understand the product through the policy. It is also worth noting that there is no such thing as “fine print” in policies and that confusing clauses can be construed against the insurer in a claim.
The insurance market can offer a huge range of products and services to the employer. It is not only a market that provides protection through policies, but also offers advice to manage risk by identifying it, measuring it, mitigating it and, in the end, transferring it. Most brokers and agencies, along with some insurance agents, are experts in risk management and quickly become allies of the employer.
There are several types of insurance for SMEs. It is convenient to start with those that the law establishes for employers and are those related to social security. Special mention is made of occupational risk insurance to protect employees against accidents and occupational disease. If your company works in UAE, dealing with the Group Health Insurance in Dubai is a good sample of how you can protect your employees from “health-related threats.” This makes perfect sense because, despite the existence of the protection offered by this insurance, the occurrence of the claim ends up affecting the productivity of the company.
There are other insurances in addition to those dictated by the social security system, including those that protect the company from potentially catastrophic risks. Catastrophic risks are those whose manifestation can take the company out of the market. They may vary according to the type of company, but there are some that have this categorization in an important part of SMEs, among them those of natural origin such as earthquakes and fire.
These catastrophic risks must be weighed carefully. By their nature, catastrophic risks are of low frequency and, therefore, they are not commonly perceived adequately. This makes us tend to look down on them. Don’t make that mistake and let the experts advise you on protecting them.
There are other risks that are more likely to occur, but they are not necessarily catastrophic. Among them, for most SMEs, are theft, waterlogging, flooding, hurricane force damage, hail damage, damage to machinery and equipment, etc.
The insurance market has developed a series of coverage packages for the employer that offers protection for a large part of the risks mentioned here. These packages can be modified to suit the type of business you have.