Despite employing 40% of India’s workforce and accounting for 45% of the total Indian manufacturing output, less than 5% of SMEs in India are insured. Insurance plays a significant role in mitigating risks faced by this sector, which is referred to as the backbone of the Indian economy. And with the government targeting the sector’s share in exports to grow from 49 per cent to 60 per cent, and five crore more jobs in this sector by 2025, the need for insurance adoption in this sector has become all the more significant.
“It is critical for small businesses and startups to own business insurance that can provide financial protection against any monetary loss and helps in smooth business continuity. While different organizations have different risk tolerances and differing abilities to pay, we agree that insurance is a must-have for all business types and sizes,” says Sajja Praveen Chowdary, Head, Policybazaar for Business.
In events of natural or business catastrophe, the economic losses faced by MSMEs far exceeds the insurance loss, making them more vulnerable, while large corporations with their better risk practices and deeper cash reserves are able to cushion any setback. “Unlike large corporations that often have the financial buffer to absorb unexpected losses, MSMEs operate with thinner margins and are more vulnerable to uncertainties. Insurance is not just an added cost, but a crucial safeguard for business continuity of MSMEs. Moreover, they have specific needs that differ from larger enterprises. The scale of their risks might be smaller, but the relative impact can be significantly more detrimental, necessitating customised coverage,” says Sanjeev Mantri, ED, ICICI Lombard.
REASONS FOR LOW ADOPTION
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