It has been strongly observed that unforeseen eventualities have nailed down the human since ancient time. Precaution is always better than cure. Human has seen to be clever in this regard as he always keeps himself equipped with the required things for such emergencies. In today’s era, talking about financial contingencies insurance seems to be a smart choice. Just as home, car and other assets Small Medium Enterprises do require insurance. As per report published by FICCI, SME sector has low insurance penetration rate. However, this low rate is because of lack of documents, proper booking and identification of SMEs.
Insurance is at utmost importance as far as SMEs are concerned. It safeguards business against unforeseen contingencies, manages or reduces cost of unplanned risk and keeps finances intact; hence maintains consistency. Since, SMEs have small businesses and less funds in the form of savings which cannot revive business again in case of unfortunate event. Moreover, continuous wavering in the business makes the insurance a ‘must’ thing to back it up with sufficient funds.
Taking into consideration, natural calamities, theft or burglary, terrorism, death or critical illness, unfortunate event or accident such as fire lead to financial stress where Insurance acts as a lifeguard. However, peeping through the above high risk factors which can shut down the business easily, SMEs don’t seem to be keen on getting the insurance. Neither they are aware of the products nor compatible to price sensitivity. It is sad to see that SME entrepreneurs unwillingly go for insurance with a push by a friend, family or insurance agents. This extends to tax exemption as well.
Undoubtedly, there is lack of much needed and convincing insurance plans to suit and attract SMEs. Insurance provider should discern this factor as one of the causes for low rate of insurance penetration in SMEs. Insurance companies should design plans for SMEs and their pertained issues. These plans should be easily tailor made for every business as per the required coverage. Nevertheless, on the other hand, SME entrepreneurs should understand the importance and need for these insurance plans for their businesses. To avoid the long term harm out of contingencies SME owners should go for suitable insurance plans. In India, this sector constitutes the considerable GDP in the Indian economy. Insurance company should understand the importance and needs of this sector through market research and comparison and design the plans much required for this sector.