The civil unrest and looting which broke out in parts of the country in July 2021 affected 45 000 businesses and caused an estimated damage of R16 billion. Many of the affected businesses were small and medium enterprises (SMEs) who felt the consequences of the unrest acutely. What this period of instability has driven home for many small businesses is the importance of being adequately insured.
These are the types of insurance that small businesses need to consider:
Insurance for company assets
SME owners often think of insuring their offices and workspaces, but just like a home owner would be advised to insure the contents of their home, SME owners are advised to insure their office equipment. You need to consider your electronic equipment, such as laptops, as well as all risks cover for while laptops are or any other digital equipment are used when in transit – with the advent of remote working, this has become particularly important.
Personal Accident cover
Personal Accident is one of the most prevalent business risks as it provides cover against health and safety accidents. The policy protects the business owner and their employees from financial loss following accidental injury or death. If the business owner is involved in an accident while at work and they suffer a lifelong disability, that could close a business’s doors.
Employee theft and fraud
When small business owners think of protecting themselves against theft, they may instinctively think of incidents of theft by external parties – like shoplifting in a cosmetics store, for example. But what about theft by employees? Such theft can also include fraud. You need to consider that even if legal action is taken against the employee involved, they may not be able to afford to compensate the business for the goods or cash they stole. This is where a commercial crime policy comes into effect and makes sure that your SME is protected against potentially large losses, which in many cases, accumulate over a period of time.
Insurance against damage caused by civil unrest
South African state-owned enterprise, Sasria (South African Special Risks Insurance Association) is the only insurer that provides cover for damage caused during a politically motivated riot or public commotion. In the aftermath of the July looting, over 14 000 claims were filed with Sasria by the small businesses who had the foresight to make sure that they were covered in the event of civil unrest. These claims, which were honoured by Sasria amounted to over R6 billion. The unfortunate reality is that there were more small businesses who were not covered against social unrest, and were forced to scale down their operations, and in some cases close their doors.
Loss of profit or revenue following business interruption
Business interruption cover insures a business against loss of revenue and ensures that a business is able to continue paying overheads and expenses such as rental and employee wages during a period of downtime. A good example of a business interruption event is if a restaurant kitchen caught fire and the restaurant was unable to serve customers and earn an income, but still has to pay rent. Another example could arise from loadshedding causing damage to machinery.
Cyber liability insurance
The rate of cyber-crime globally and in South Africa is rising exponentially with the proliferation of digital technology. Cybercrime such as data breaches and ransomware attacks can be devastating for a small business. In this relatively new and unchartered environment, small businesses should consider taking out cyber liability insurance, which covers damages resulting from a cyber security breach. This includes the cost of investigative services, data recovery, identity recovery, customer notifications and legal fees.
As an SME, you can minimise the cost of your insurance premium by approaching an institution that can provide a comprehensive offering that ticks multiple boxes. Remember that insurance is a highly competitive environment, so good negotiation skills will go a long way in making sure you get the best rate.