- By Anjali Malhotra
Ease of Doing Business for MSMEs: Insurers have a responsibility towards the financial education of business owners and simplifying their insurance journey. With over 70 million units, India has one of the largest micro, small, and medium enterprises (MSMEs) base in the world. These MSMEs contribute about 40 per cent to India’s GDP and create over 180 million jobs. As the nation embarks upon a journey to become a $5 trillion economy, MSMEs will play a vital role. However, the recent outbreak of Covid-19 has posed business continuity challenges for many MSMEs. Thus, it is important not only to revive these units in the short run, as indicated by the Government of India but also prepare them for a more secure future. The ongoing government support and other measures such as technology upgradation, financial security and liquidity, market linkages are expected to enhance the ecosystem for MSMEs.
Although the risk is an intrinsic part of any business, entrepreneurs are the real risk-takers. An MSME has three roles – business owner, employer and the head of the family. As a business owner, an MSME must understand that insurance can make their business resilient to shocks, making it more financially sound. As a head of the family, there arises the need of providing financial security to their family in case of any eventuality, such that no creditors, courts may attach the monies required for the upkeep of the family. As an employer, the MSME needs to secure employee welfare and reduce attrition. To sum it up, employee benefits, assets & liability and family protection are key areas where insurance is essential for MSMEs, most of such businesses do not get quality insurance advice because of their limited scale of business and also due to the fact that they find it hard to learn from subject matter experts to help cover their risks appropriately.
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Though insurance is a discerning way to check liabilities in the event of harm to assets and business, even today, it is wrongly considered synonymous with life insurance or health insurance. The fact is that insurance can cover almost every aspect of the business, be it damaged due to natural calamities, supply chain disruptions, unfavourable market movements, or even untimely demise of an employee. Moreover, insurance products can be customized to suit the specific industry and business size. Thus, including insurance as a part of long-term business investment is critical for MSMEs, which may not have huge cash reserves or funding to absorb market shockers. In most cases, the financial fortunes of their organisation are intricately linked to their own well-being. Most MSMEs borrow heavily from the market and hence there is an obvious need for life insurance. Yet, this market is most under-penetrated and under-served by the Life Insurance industry as well.
To address the problem of under-penetration of insurance among MSMEs, insurance companies should take a step towards educating the MSMEs about various insurance solutions and create awareness on the need for financial security for their business. As people are spending more time on digital platforms nowadays, companies can offer a customized and transparent solution to cater to the specific needs of MSMEs.
The bottom line is to change the perception of insurance among MSMEs. We need to help them see insurance as an essential step towards safeguarding and strengthening their businesses in a planned and structured manner so that even in difficult times they can take care of their family, employees, and business. At the same time, as insurers, we also need to simplify the entire customer journey, i.e., evaluating, buying, and claiming the insurance benefits in order to secure their future. This will help MSMEs secure their future and play an even bigger role in India’s economic growth in the days to come.
Anjali Malhotra is the Chief Customer, Marketing, Digital and IT Officer at Aviva India. Views expressed are the author’s own.
