SME Insurance: 8 things every business owner in Hong Kong must know

Insurance is a complex topic for many SME owners, but it doesn’t have to be. Below are some of the most frequently asked questions from our clients, and our answers:

SME insurance provides crucial protection for small businesses. Not only does it help protect business assets, income and property, it also provides a financial safety net. For example, if  an unfortunate event happens to your business, you could face property damages, business interruption, demands for medical compensation, lawsuits, or all of the above.

On the other hand, personal insurance provides coverage for an individual’s private property unrelated to a business. Personal auto insurance, for instance, doesn’t cover damage and theft of business-owned vehicles.

“Only big companies need insurance” is one of the most common misperceptions about insurance. All businesses – no matter how big or small – come with risk. In fact, SMEs can be especially vulnerable to disruptions, are generally less able to afford significant losses caused by unpredictable events, and can be financially devastated by a loss.

Insurance is also essential for your 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 we saw during the pandemic).

Moreover, in the current dynamic business environment, there are always exposures that you may not be aware of, or which did not exist when you first started the business, or have become more salient over time.

Using the compensation paid by insurance companies, an insured business is much more likely to recover from losses quicker than those who are uninsured.

SME insurance typically includes three basic types of coverage: business property, liability, and business interruption.

• Business property: protects your business against loss and damage of building and equipment due to events such as fire, flood, and water damage.
• Liability: protects against financial loss resulting from bodily injury, property damage, medical compensation, lawsuits etc.
• Business interruption: Covers loss of income and business expenses, such as rent and employee wages when operations are halted when disasters hit.

Instead of taking only the cheapest, most minimal coverage, we recommend these basic coverages for wide protection against some of the most significant threats we have seen among Hong Kong SMEs.

Beyond that, you may also consider purchasing additional insurance coverages to customize your policy based on your specific operation and needs. For example, if you have a considerable e-commerce presence, adding cyber coverage to your policy is of critical importance given the prevalence of cyber incidents in recent years.

We also recommend assessing your business contents and understanding their value to determine how much insurance is needed to protect them.

The cost can vary greatly, depending on various factors, including the type and size of business, your location, number of employees, and the extent of insurance coverage required.

But agent fee is not one of them. Insurance agents don't charge an additional fee for professional advice and support as they earn commission fees from insurance companies. So the quote you receive from your agent is the total amount you pay.

Find out more about the factors that affect how much you will pay for insurance.

Your insurance rates are determined in part by the steps you've taken to manage your risks. Proactively taking preventive measures to mitigate your business’ exposures is certainly one way to save money on business insurance.

In addition, there are cost-effective solutions that can meet both your budget and protection needs. For instance, Enterprise Guard Plus bundles several coverages that are otherwise sold separately to offer cost-conscious SMEs significant savings and convenience while providing broad protection against everyday exposures. It is more 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.

Good insurance isn’t just about the lowest premium. It is critical find an insurance partner that can meet your needs and has the financial capacity to service a claim when it arises.

With many Hong Kong SMEs starting to do business outside of the country, it is also important to find out what value-adds (e.g., risk management advice and risk engineering services) the insurance company can provide, and whether it can service your operations in different markets.

The insurer's ability to provide a seamless and time-saving insurance purchase experience is the next thing to consider. For example, the Enterprise Guard Plus uses an online platform that allows agents to get a quote, buy a cover, and have a policy issued anytime any day. What this means is, instead of filling out long and complicated proposal forms and waiting for weeks for them to be processed, you could be working with your agent to complete the forms  all online from the comfort of your premises.

An experienced insurance agent will take the time to understand your business and help you choose the right product for you and your business, at the right price. Speak to an agent to evaluate your needs and determine the most appropriate coverage.

Minimally, your insurance coverage should be reviewed every year and be incorporated as part of your annual business review.

However, we recommend contacting your agent when there are important changes to your business (e.g., new product or service offering, business expansion or moving your office to a new location) to find out how these changes might affect your risk profile, and what policy amendment is required to ensure you receive the entitled compensation when you have to make a claim.