Many Singapore companies say they only take action to address business liability risks after they experience an incident, according to a new report released yesterday by QBE Insurance.
QBE’s “The Risks of Regret” report found that many businesses are more likely to take out business liability and professional indemnity insurance only after something happens. One quarter of SMEs (23%) do not take any action, compared with 10% of large corporates.
“As a result, these companies are missing opportunities for obtaining compensation for the initial event, and potentially putting the stability and even the continuity of their business in jeopardy,” said Mr Karl Hamann, CEO of QBE Insurance Singapore.
In the past 12 months, the most frequently encountered risks cited by businesses included: loss of income due to business interruption (24%); business systems and computers hacked (24%); equipment breakdown (23%); legal, regulatory or compliance issues (21%); staff injured while working (20%); and customer or payment fraud over the internet (10%).
Tendency is to be reactive rather than proactive
QBE’s research reveals that the tendency of companies to react afterwards is common across various types of risk. Of the businesses that suffered a sensitive data breach, 61% took action afterwards. Meanwhile, 49% reacted after their business systems and computers were hacked. For those experiencing other problems, the post-event reaction was similar: public or third party liability issues (46% took action after); public or third party liability due to accidents or business negligence (45% reacted after); and customer or payment fraud (40%).
Surprisingly, several respondents also said that they took no action even after an incident. For example, one quarter (23%) of Singapore companies which experienced customer or payment fraud over the Internet still took no action at all. Another 15% of respondents took no action even after public or third-party problems with their products or services.
“Given the risks and challenges, it’s also surprising that companies are not doing more to shield themselves through business liability and professional indemnity insurance,” said Mr Hamann. “In an increasingly litigious world, with professional liability high on the agenda, there is an obvious concern that Singapore’s companies need to be doing more to protect themselves and their customers.”
Unsatisfactory awareness of business liability insurance
The report also reveals that nearly all Singapore respondents (96%) have some form of business insurance, including general accident and employee compensation cover. However, awareness and purchase of business liability insurance protection is far lower. Only 68% of Singapore respondents were aware of business liability cover and 57% had taken out such insurance.
Professional indemnity insurance fared even worse, standing at 34% awareness and 21% usage. Public and product liability insurance stands at 31% and 20% respectively, while the figures for director and officer liability insurance fall to 25% awareness and just 16% usage.
When asked why companies did not own business liability or indemnity insurance, a quarter of Singapore companies (26%) said their businesses were too small and the costs are bigger than the risks. Another one quarter of businesses (24%) cited budget issues, and a further 20% said they had other business priorities. One in five (20%) said insurance policies are too complex and 17% said believe their financial risk is reduced sufficiently because they are limited companies.
“Quite alarmingly, one in five respondents in Singapore said that having business liability insurance has never really crossed their minds,” noted Mr Hamann.
QBE’s Risks of Regret Singapore report is based on phone interviews and surveys with 300 SMEs and large corporations in Singapore from March-April 2017 with respondents equally split across six sectors: IT and telecoms, healthcare, financial services, manufacturing, construction and engineering and professional and business services. It also addresses both current and future business challenges and opportunities for SMEs and large corporates. More information is available here.