As an SME owner, you are excited about many things: entrepreneurship, business plans, next market and next product. But how often do you pay attention to the risks that can threaten the business you have spent years building
If your answer is "rarely" or "after a disastrous event", you're not alone.
Awareness of risk management among Hong Kong SMEs has been low, and misconceptions often cloud their understanding of insurance as an essential tool for managing risks and protecting against losses.
Below we look at some of the most common myths about business insurance among Hong Kong SMEs:
"Only big companies need insurance."
No business is too small to be hit by an unfortunate event, whether a natural disaster, equipment failure, or a cyberattack. SMEs are not only more vulnerable to certain disruptions, they are generally less able to afford large losses caused by unfortunate events.
Insurance is also essential for SME owners' financial stability because of the often-close relationship between the business and personal assets (e.g., many SME owners tap their personal savings to cover emergency costs, payroll, and to stay afloat as was seen during the pandemic).
"Insurance is too expensive. I don't need another expense."
Insurance costs vary from business to business and premiums are dependent on many factors (e.g., location, business type and size).
There are cost-effective solutions that can meet both your budget and protection needs. For instance, a package policy (i.e. a single insurance policy that bundles several coverages that are otherwise sold separately) that is specially designed for SMEs could provide significant savings. They are affordable due to the lower administrative costs associated with managing a single policy, as opposed to multiple policies.
Having the flexibility to pick and choose which elements of coverage you want instead of buying the whole package also helps with cost-saving.
"Insurance is too complicated. I don't have time for it."
There are indeed many insurance products in the market, and it can be overwhelming for SME owners. The good news is, there are one-stop solutions that can help make insurance sourcing/purchasing easier and relieve you from the administrative burden.
In addition, some insurers have simplified the application process to help SME owners save time from having to fill out long and complex proposal forms to get a quote or a policy issued.
If you do not have the luxury of time to do your own research, you may benefit from consulting local business associations or an insurance professional.
"My business is relatively risk-free. Having insurance or not won't make a difference."
Operating any business involves risk and with the ever-evolving business environment, there are always exposures that you may not be aware of, did not exist when you first started the business, or have become more salient over time.
The reality is, every loss can have a significant impact on your business, so it is important that you speak to an insurance specialist or agent to understand the exposures better.
"I have enough insurance and I renew it every year."
Do you review your business plans and financials regularly? If so, you should also perform annual reviews of your coverage to ensure your company's risks are well-covered.
Suppose you have only been renewing existing policies based on past, instead of current, conditions, you may be unpleasantly surprised by insufficient coverage when a claim is made.
Whatever the size of your business, insurance can provide a measure of security that may save your company and help your business bounce back from unforeseen disasters, including the most common ones faced by SMEs in Hong Kong.
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Disclaimer - All contents of the article is intended for general information/guidance purposes only and not intended to be an offer or solicitation of insurance products or personal advice or a recommendation to any individual or business of any product or service. This article should not be relied on for legal advice or policy coverage and cannot be viewed as a substitute to obtaining proper legal or other professional advice, or for reading the policy documents. You should read the policy documents to determine whether any of the insurance product(s) discussed are right for you or your business, noting different limits, exclusions, terms and conditions apply in each country or territory, and not all cover is available in all countries or territories.
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