As all insurance markets today stay competitive with mushrooming insurers as well as new product inventions, the SME’s have benefited in a large measure in terms of awareness. There is a wide range of insurance options available to the business owners, mainly due to the aggressive selling by insurance companies and banks.
Here’s Mr. T A Ramalingam, Head-Underwriting, Bajaj Allianz General Insurance Company, Corporate Office-Mumbai, shares with Small Enterprise India their brand new insurance products and his views on SME market.
SME Insurance is a recently developed wing in General Insurance Industry. How do you see the growth of this channel?
The SMEs have become an extremely lucrative segment today. Earlier this was not the scenario. The lower premiums and the scattered nature of small businesses made them unviable for insurers. Today, SME insurance is one of the fastest growing segments after Health Insurance products and Vehicle Insurance.
What all are the products specifically inclined to SME’s ?
Besides individual commercial policies like fire, burglary and liability policies, Bajaj Allianz offers comprehensive package policies for offices / shops.It covers all office / shop related risks under one policy.
The Policy covers building (if owned) and contents against fire and allied perils and burglary. It also covers breakdown of office equipment, including electronic equipment and laptops. Fidelity Guarantee attached to it gives protection from being victimised by fraudulent and dishonest employees. Its combination with public liability makes it more attractive. There are added features like personal accident coverage and hospital cash daily allowance benefit for family in case the insured is hospitalised .
All the insurance requirements are addressed by a single policy, thus saving time in fulfilling procedural requirements .It offers a one stop shop solution for the clients business related needs and is tailor-made as per client's needs.
We have filed a commercial package product aimed at covering exclusively the interests of SME’s and the approval for the same is awaited from the regulator. The policy covers fire, personal accident, workmen’s compensation, money insurance, burglary and liability exposures for SME clients.
What is the role and ratio of corporate insurance policies in Indian SME segment ?
It is very difficult to give an exact figure, however it should be approximately 25-35% of our total fire premium.
Please explain about the Template Insurance products for SME’s?
Template Insurance is same as a package policy. Template Insurances are not pre underwritten, but are tailor made as per the client’s requirements and specifications.
What is Credit Insurance ?
Credit Insurance is a form of Insurance which helps SME’s to protect their balance sheets. It ensures that your most liquid asset- trade receivables are protected. Credit Insurance offers a host of benefits like :
- Balance sheet protection and improved cash flow.
- Enhances financing: Collateral for banks to fund your business, as trade receivables are underwritten and guaranteed by the insurance company.
- Enables SME’s to enter new markets safely and expand your customer base as we provide information and underwrite the credit risk on new customers
- Improves the quality of credit management system, by providing a disciplined approach to new customer’s credit limits, reporting overdues and undertaking collections.
Our Credit Insurance cover applies to trade receivables which are:
- Business to business transactions., ie, excluding consumers and public
- Due within 151 days of dispatch of goods and invoice
- Due from customers based in India and designated major overseas
- Approved prior to shipment by us upto a maximum credit limit and given credit ter
Is it true that small businesses in India typically lean in favour of public sector insurers?
Not at all. Most of our business is produced either by bankassurance or agents who have relationships with both the private and the public sector insurers.
What are the major challenges before the industry in underwriting more and more SME schemes?
Many of the SME units in our country are un insured and they feel that Insurance is a cost which can be avoided. Only when some kind of tragedy like fire or floods strike them do they realise the need for this cover.
SME’s generally underinsure their properties with the result that in case of a claim they are not adequately covered. Many of these SME’s only cover their property to the extent they have taken loans from banks.Many of the SME do not have proper fire fighting equipments and hence pose a risk for underwriting. Also, the low premium ticket size of SME products in comparison with the claim settlement ratio and cost is a challenge.
Is it true that the credit squeeze enforced by the RBI could stunt the demand for insurance from the small business segment?
Not much. May be temporarily there is an impact, as we have discussed earlier, many SME’s cover their properties for the sake of bank credit and to that extends.
Is there any insurance against business collapse?
No. No insurance company offers insurance against collapse.
What are the basic things to be known for liability claim settlements?
All liability claim settlements are judged and settled on the basis of court judgements. It will be settled by the insurer on the basis of the judgement, where communication directly passes to the insurance company from the court. There is no such claim intimation associated with liability insurance as in own damage products.
How would your company help SME's in portfolio management and renewal tracking?
Each channels and sales department have their own customer base. They keep their customer portfolio, claim settlement assistance, service, renewal reminders and more over, offer risk management and risk mitigation techniques.
Templates insurance or Package Policies is the right choice to be adhered to, in our insurance choice. Don’t neglect insurance as a cost which can be avoided. Instead it is a prime need in business, as there are risks involved in all businesses. “An ounce of prevention is worth a pound of cure”.