Nigerian SMEs and the Risks of Being Uninsured
SMEs are built on the hard work, passion and optimistic vision of their founders who strive daily to take their business to the next level. Some audacious founders have big dreams for their firms and, in the push to realize their vision, easily overlook the risks that come with small businesses.
SMEs are especially vulnerable to numerous risks encountered in business, which can jeopardize the entire investments in minutes. Such events include fire outbreak, burglary, floods, legal actions, accidents etc. In the light of this reality, the importance of insurance in mitigating the impact of these risks on the business cannot be overemphasised. [i]Data from the Nigeria Bureau of Statistics show that a staggering 65.16% of SMEs operating in Nigeria are without insurance, leaving them vulnerable to various risks that can negatively affect business growth and, in some cases, leading to a total shutdown of business activities. This can be traumatic to small businesses, many of which were established with capital generated from loans and hard-earned savings of their founders.
Here are some of the risks uninsured SMEs stand to face and the value that insurance provides.
A. Damage to property and equipment: Apart from human resources, many SMEs invest heavily in properties and equipment. However, damages caused by fire, natural disasters, flood, lightning, malicious damage etc. can lead to financial exposure that may collapse the business. [ii]In 2016, business owners in a popular shopping plaza in Ogba witnessed a devastating flood that completely damaged their assets worth millions of Naira. The cost of replacing or repairing such damaged assets can be so significant that it affects the chances of the business staying afloat.
B.Theft and Burglary: Burglary can impact hugely on how a small business thrives under these tough economic situations. Replacing stolen equipment and properties can be very expensive, making having an insurance cover against burglary very necessary. With an appropriate insurance cover, in the event of a burglary incident on the business premises, business owners can recourse to their insurer to either replace the stolen items or pay compensation to help the owner recover. This kind of arrangement allows entrepreneurs focus primarily on growing the business without having to worry about risks.
C. Employer’s liability: As an employer of labour, you can be held liable and financially responsible for work place accidents involving your employees. These can range from the high cost of the medical bill emanating from the said accident to the cost of legal action from affected employees who decide to sue. [iii]In Nigeria, all employers of labour with more than three employees are mandated by law to have insurance to provide for compensation in the event of death, disappearance, disability, or critical illness suffered by staff while in service. A Worker’s comprehensive insurance covers you from this; thereby allowing you avoid the high cost of medical bills associated with injured workers.
D. Occupier’s liability: Since you run a business, you will be interacting with customers coming into your business premises. Imagine one of your customers tripping on a loose tile in your premises, falling and ending up with a broken limb. Medical bills aren’t cheap, especially in a situation where it is unexpected. There is also the chance that you could be sued. The impact on your business could be enormous. Luckily, occupier’s liability insurance exists to protect you as a business owner from such uncomfortable situations.
Considering all these unforeseen circumstances SMEs are likely to encounter, it is imperative that business owners avail themselves of insurance policies that provide coverage against these risks. Insurance also gives the business owner the confidence to run his business without worries, allowing innovation to thrive. Knowing the value SMEs add to the Nigerian economy and the need to protect them, Leadway Assurance Limited designed an insurance policy, which provides cover for SMEs across various risk points, known as the Leadway Business Owner Support Scheme (L-BOSS).
L-BOSS offers five different levels of cover to help protect small and medium-sized businesses against various risks such as cover for material damage to business premises and their contents (e.g. computers, items belonging to customers), motor vehicle insurance cover, cover against fire, lightning, limited explosion, earthquake, volcanic eruption, malicious damage, strike, riot, flood, storm, impact and burglary on the business premises.
Also, L-BOSS provides comprehensive vehicle insurance cover against theft, damage, fire and towing cost for vehicles operated by the business, including up to N1, 000,000.00 compensation in claims from third parties for death, injury or damage.
Not leaving out your employees, L-BOSS provides life assurance and death-on-service life cover for workers in fulfilment of employer’s obligations by the Pension Reform Act, while also providing cover against cost of medical expenses as a direct result of work related accidents and occupier’s liability insurance cover against possible legal suits as a result of injury suffered by visitors to your business premises.
To find out more and get started on L-BOSS, Call Leadway Assurance on (01) 2800 701 and 2800 700 or email: Lcs@leadway.com. You can also visit our website: www.leadway.com.