1 in 7 of smaller Singapore SMEs have no business insurance, survey finds

The Singapore Central Business District.
The Singapore Central Business District. ST PHOTO: ALPHONSUS CHERN

SINGAPORE - Small and medium enterprises (SMEs) in Singapore remain underprepared for dealing with significant business risks and threats, according to a survey by global insurer QBE.

Its research revealed that as many as one in seven smaller SMEs do not have any business insurance at all. These SMEs - with 5~20 staff or revenue of less than S$1million - represent about 21,183 firms when extrapolated across Singapore.

Over half of SMEs surveyed (53 per cent) also said insurance was low on their priority list while 56 per cent agreed that minimum coverage was adequate rather than seeking greater protection of their business and assets.

With SMEs employing almost two-thirds of working Singaporeans and delivering 48 per cent of the country's gross domestic prouct in 2014, this de-emphasis on risk could have worrying long-term impact, said QBE.

Karl Hamann, chief executive officer, QBE Insurance (Singapore) Pte Ltd, said: "SMEs play an unrivalled role in mobilising and growing the local economy. But while these organisations remain inwardly-focused on their own profitability, financial survival through difficult economic times remains an ongoing concern that can only be mitigated through comprehensive risk management."

For example, the SMEs surveyed rated staff and talent concerns such as acquisition, training and retention as their biggest challenge. But the number of respondents who hold insurance against loss of key staff or loss of income due to business interruption was relatively low.

The most common insurance policies owned by SMEs were for the risk of employees being injured while working and insurance against theft/robbery, the survey found.

QBE surveyed 450 SMEs in Singapore from Oct 26 to Nov 9.

In addition to overall attitudes regarding the importance of insurance, the survey found that local SMEs make insurance purchasing decisions without undertaking adequate research or being informed by deep understanding of the process.

Smaller SMEs are particularly worrying in this regard, as they have less concern for business risks than larger SMEs, less appreciation for insurance decisions and less appetite for greater protection, said QBE. This also stems from the fact that smaller SMEs are more focused on short-term considerations like retaining customers and reducing costs, compared to the long-term focus of larger SMEs, it added.

Said Mr Hamann: "Failing to make informed insurance decisions hinders business continuity and future success. As such, SMEs need to be better prepared for even the most common risks, whether a small hi-tech parts manufacturer better protecting its equipment against damage or theft, a consultancy insuring itself against the loss incurred due to acting on wrong advice, or any kind of retail-focused company guarding against liability to customers that purchase their products."