Most small and medium-sized enterprises (SMEs) in Singapore remain underprepared to deal with significant business risks and threats, according to a survey by global insurer QBE. The research also found that of the SMEs surveyed, as many as one in seven smaller SMES (ie those with 5-20 staff or annual revenue of less than S$1 million (US$697,391) in the Republic do not have any business insurance at all.
There is a prevailing perception among the majority of SMEs that insurance is a “commodity” product, where a basic level of cover is perceived to be sufficient, said QBE. Despite recognising its value in helping their businesses operate better, over half of SMEs surveyed (53%) admitted insurance was low on their priority list while 56% agreed that minimum coverage was adequate rather than seeking greater protection of their business and assets.
With SMEs employing almost two-thirds of the workforce and delivering 48% of the Republic’s GDP value in 2014, this de-emphasis on risk could have worrying long-term impacts, said Mr Karl Hamann, CEO, QBE Insurance (Singapore).
Lack of deliberation in insurance purchasing and planning
In addition to overall attitudes regarding the importance of insurance, the research found that local SMEs make insurance purchasing decisions without adequate research or deep understanding.
Almost two-thirds of all SMEs believe price is the most important concern when choosing insurance products and policies, failing to take into account how more specific offerings best fit their individual needs.
Insuring against staff and talent issues
Even with the high level of concern among SMEs toward loss of income and of key staff due to business interruption, the number of respondents who hold insurance against these risks remains relatively low.
The most common insurance policies owned by SMEs are for the risk of employees being injured while working and insurance against theft and robbery.
Positive outlook for the future
Seventy-two percent of firms surveyed expect to grow sales or at least hold their financial positions in 2016 (ie 28% expect growth and 44% expect to remain the same), while 40% expect Singapore’s economic outlook to improve this year. The survey also shows that smaller SMEs, SMEs in the service sector, younger SMEs (3-5 years old) and online-focused SMEs are the most optimistic about the year ahead.
Mr Hamann concluded: “The findings of our research indicate that Singapore remains an opportunity-rich environment in which SMEs can and will thrive. However, with these opportunities also come significant threats, and we see a need for increased awareness among companies here of the consequences of being underinsured. Education on the operational freedom that a comprehensive insurance plan offers, and better engagement by SMEs with these plans, will improve both their prospects and ensure they continue to contribute to Singapore’s economic prosperity.”
The survey of SMEs, conducted online from October to November 2015, interviewed 450 SMEs in Singapore.