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General insurance companies expect the next big growth to come from small and medium enterprises (SME). Eyeing a bigger chunk of business from the growing insurance needs of the SME sector, insurers are offering customised products and services for this segment.
Take, for instance, HDFC ERGO General Insurance. The insurance company offers a range of products under the SME vertical, said Anuj Tyagi, head (corporate business and rural agri-business). The insurer aspires to be a one-stop shop for SMEs’ insurance needs, he added.
HDFC ERGO offers group health and personal accident liability cover, which includes directors and officers' liability and other mainstream products to protect clients’ legal liabilities. Apart from these, it also provides specialised products such as cover for kidnap and ransom, crime insurance, and property and engineering cover, among others.
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“We have received positive feedback from both clients and channel partners for getting into the SME segment as a focused area of operations. The key lies in building a knowledgeable distribution network and providing innovative products with simplified processes to ensure faster turnaround time for market requirements,” said Tyagi.
While the insurance needs of large and small businesses look similar, the cover size and type of coverage are vastly different. For instance, although large and small companies may purchase fire insurance policies, the sum assured would be different, depending on the company’s size.
Similarly, SMEs go for relatively simpler covers, which are easier to understand. Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, said the SMEs are offered packaged covers, which have all the risks bundles together.
TATA AIG General Insurance offers not just products for loss or damage to assets but also for interruption for businesses and liability of small businesses due to industrial accidents, said Sushant Sarin, senior vice-president (commercial lines) at TATA AIG. It also covers the liability of the board and management of small companies arising out of wrongful managerial acts.
“As small businesses become more professional as they yield growing income for their owners, promoters or managements; as financiers of business assets seek security of their finances; and as the employment of a number of workmen and staff starts depending on the continuity of the business; small and medium businesses quickly turn to insurance to ensure financial security and continuity for themselves,” said Sarin. Hence, there is a steady growth in SME insurance, he added.
SMEs are of different categories and insurance needs are varied. In order to provide cover for the risks of these different segments, general insurers such as Reliance General are offering an entire set of products for each category.
Explaining this strategy, Rakesh Jain, CEO of Reliance General Insurance, said SMEs can be broadly classified into two types — manufacturing facility or a service industry unit. “We have a complete line of insurance products for either of the two. All products offer the flexibility to opt for various covers best suited to the entity opting for insurance,” he said.
Reliance General Insurance offers packaged products that provide some common covers. The assets including building, machinery and stock can be covered against fire and allied perils including flood and earthquake as well as burglary. Machine can also be covered against electrical or mechanical breakdown. For workers, the product offers personal accident and employers’ liability cover. Then there is the industry care package policy, which addresses the insurance protection needs of a manufacturing unit.
SMEs do not have the wherewithal to provide health insurance to all employees like big companies do, Jain pointed out. Also, because the number of employees are is low, group medical benefit policies may not be cost-effective.
With more and more SMEs entering the insurance space to get covered, they have begun to contribute a big portion to the total premium pie of the general insurance company.
Bhaskar Jyoti Sarma, managing director and CEO of SBI General Insurance, said that in the current financial year till September 30, the company has achieved Rs 113 crore gross written premium (GWP) under SME and expects to close the year with Rs 300 crore of GWP from the SME segment.
“Today, the SME segment contributes 21 per cent of our overall year-to-date GWP of Rs 541 crore and we have over 155,000 SME customers spread across the country,” said Sarma.
SBI General offers fire, burglary, marine, money, business package, pre-underwritten fire and marine and motor insurance products. For the more evolved SME customers, Sarma said the company also provides cover for business interruption, liability, group personal accident, among others.
The insurer has tapped the distribution network of banks, too. “SBI General has made significant inroads in covering SME business through the distribution reach provided by State Bank of India and associates of SBI, in addition to the other distribution channels. “SME is a special focus area for SBI General and we have a dedicated sales team of experienced SME insurance professionals to service the SME segment, which has been an under-tapped segment to a great extent,” said Sarma.
SBI General plans to expand its network of offices and the product offering to serve the SME segment better in the coming years. “We have plans to develop package and pre-underwritten products to cater to this segment and which can be sold over the counter by our channel partners,” added Sarma.
While several SMEs have insured their risks, industry experts are of the view that more awareness is required from this segment, especially in areas such as business interruption and liability covers.
“A lack of awareness, coupled with thin margins, makes insurance a low priority and is often neglected by SME customers. Most of them, especially in the micro and small enterprise segments, are low on usage of safety practices and safety equipment unlike corporates. They run huge risks of fire and workplace-related accidents, followed by floods during the rainy season. They should at least cover such risks that can cripple their business,” Sarma pointed out.
To cater to the changing needs of these small business owners, insurers such as HDFC ERGO, Tata AIG and ICICI Lombard are looking to offer more customised products in the areas of property liability and marine risks.
