Insurance is an indispensable pillar for the sustainability and growth of businesses, including Small and Medium-sized Enterprises (SMEs). In an increasingly uncertain world, the ability to manage risks and ensure business continuity is crucial and this can only be attained through insurance.
Insurance plays a critical role in the development and growth of SMEs with their offerings differing from the needs of larger corporations. For SMEs, insurance serves as a robust risk management mechanism. Unlike larger corporations, SMEs often lack the financial cushion to absorb significant losses. Here, insurance acts as a lifeline, transferring the financial burden of risks of SMEs to the insurance provider. Whether it is damage to property, loss of stock, or liability issues, the pay-out from an insurance policy allows SMEs to recover and rebuild, rather than face the possibility of closing their doors permanently.
In Ghana, Star Assurance stands out when it comes to insuring the SME sector, offering tailored insurance solutions that address the unique challenges faced by these businesses. Wide-ranging insurance coverage, such as that offered by Star Assurance, signals to investors that the business is well-protected against unforeseen events.
Benefits of Insurance to SMEs Growth and Development Aspirations
Insurance plays a crucial role in the growth and development aspirations of SMEs by offering comprehensive protection against various risks. By safeguarding physical assets such as buildings, equipment, and inventory, insurance mitigates potential losses from fire, theft, natural disasters, and accidents.
Moreover, “Policies like Workers’ Compensation and Group Personal Accident provide cover for workplace injuries, ensuring medical expenses and lost wages are compensated, thereby reducing the financial burden on businesses. This protection allows funds that would have been spent on loss recovery to be reinvested in other business areas.”
Credit enhancement is another significant benefit that insurance provides to SMEs. “Lenders often require SMEs to have certain types of insurance (e.g., property or liability insurance) as collateral for loans, making it easier for businesses to access financing for growth. Having policies like Credit Insurance also protect SMEs from losses due to non-payment by customers, enhancing their ability to extend credit and expand their customer base”.
Furthermore, insurance ensures business continuity— a critical factor for SMEs that may not have the diversified revenue streams or reserve funds of larger companies.
“Insurance provides a financial mechanism to pay for the reinstatement of loss or damaged assets and ensures a business does not sink with its losses during unexpected disruptions”. It is therefore vital for business continuity, especially during uncertain times. It allows SMEs to focus on long-term growth by securing their operations against unexpected events.
Above all, insurance provides peace of mind, ensuring quicker recovery from losses and shielding businesses from legal claims, ultimately safeguarding their financial stability.
Differentiating Insurance Needs: SMEs vs. Large Corporations
While the fundamental purpose of insurance is similar across all businesses, the specific needs of SMEs differ significantly from those of larger corporations. Large corporations typically operate on a global scale, requiring comprehensive and often international insurance coverage. These companies face complex risks due to their vast workforce, diverse product lines, and intricate supply chains. As a result, they need specialized insurance policies, such as directors’ and officers’ liability insurance, cyber risk insurance, and business interruption insurance.
On the other hand, SMEs generally operate within a single district, region, or country, and their insurance needs are more localized. Their primary concerns are protecting core assets, employees, and managing local liabilities.
In view of this, Star Assurance addresses these needs by offering standard packages like Combined Fire and Burglary insurance, which bundle essential coverage tailored to the SME sector. These packages are designed to be affordable and straightforward, aligning with the financial capacities and operational scope of SMEs.
“Large Corporations have the financial strength to absorb larger deductibles and are better placed to invest in self-insurance or captive insurance programs. They may also seek customized solutions that align with their risk management strategies. Large Corporations often face stringent regulatory requirements across multiple jurisdictions, necessitating compliance-specific insurance solutions. They might need specialized coverage like environmental liability insurance or industry-specific policies. However, SMEs typically have limited budgets and may prefer cost-effective insurance solutions with lower deductibles and premiums. They often rely on standard, off-the-shelf insurance products that are simple and affordable. SMEs generally need to comply with less complex local regulations. They require coverage that meets mandatory requirements such as public liability insurance and in some cases, workmen’s compensation.”
Adapting Offerings to Meet Diverse Market Needs
Star Assurance’s approach to insurance is deeply rooted in understanding the specific needs of its clients, whether they are large corporations or SMEs. This client-centric approach ensures that every business receives the optimal level of coverage and support, tailored to its unique operational environment.
For Large Corporations, Star Assurance recognizes that large corporations operate on a much larger scale, often across multiple locations and even globally. To cater to these complex needs, Star Assurance offers tailored insurance programs that aligns with the specific risks and operational scope of these companies. These programs may include global policies, industry-specific products, and comprehensive risk management consulting.
The company’s Technical and Risk Management Units provide dedicated support, helping larger corporations identify, mitigate, and transfer risks effectively. This includes services such as “loss control, claims management, and bespoke reinsurance arrangements”, all designed to ensure that the corporation’s operations are safeguarded against a wide array of risks.
On the other hand, SMEs typically operate on a smaller scale and face different challenges compared to large corporations. As such, Star Assurance has designed its offerings to be accessible, affordable, and easy to understand for SMEs. One of the standout products is the Store Ban Bo– a comprehensive insurance package that bundles essential coverages such as property, liability, and personal accident insurance.
Star Assurance also places a strong emphasis on simplifying processes for SMEs. The insurance application and claims processes have been streamlined to make them more accessible and manageable for small business owners. This approach ensures that SMEs can easily navigate the insurance landscape without the burden of unnecessary complexity, enabling them to focus on growing their businesses.
Emerging Insurance Products for the SME Market
As the business environment continues to evolve, so too do the risks faced by SMEs. To address these emerging challenges, the insurance industry, including Star Assurance, has been developing new and innovative products tailored to the specific needs of small businesses. Some few examples are:
Cyber Security Insurance: With the increasing digitalization of business operations, SMEs are becoming more vulnerable to cyber threats. “Cyber Security Insurance is quite new in the insurance space, as such, many SMEs are not adequately protected against cyber risks, which can lead to significant financial losses. These policies often include coverage for data restoration, legal fees, and crisis management and help mitigate these risks, ensuring business continuity in the event of a cyber-attack.”
Business Interruption Insurance: Business interruption insurance is designed to cover the financial losses that a business may suffer following the interruption of operations due to insured risks such as fire or flood. “It is usually taken as an addition to the Fire and Allied Perils policy. It is especially relevant in the current era of climate change and global pandemics. Coverage can extend to supply chain interruptions, property damage, or other factors that halt business operations.”
Parametric Insurance: Parametric insurance is a relatively new product that pays out a predetermined amount when specific parameters, such as rainfall levels or wind speeds, are met. This type of insurance is “particularly useful in agriculture, energy, and other sectors sensitive to environmental conditions.”
In December 2022, a public-private partnership was launched to create a parametric flood insurance scheme for the government of Ghana. The initiative involves the Ghana Ministry of Finance, the UN Development Programme, the German Government and the Insurance Development Forum (IDF) with a focus of designing a scheme to support the Ghanaian National Disaster Management Organization and local authorities after severe urban flooding.
Star Store Ban Bo: This innovative product is specifically designed by Star Assurance for SMEs, providing bundled covers that meet the unique needs of small businesses at very affordable rates. “The policy covers losses or damages caused by fire, flood, and other natural occurrences, as well as burglary and accidental injuries or death suffered by the business owner.”
Meanwhile, Star Assurance’s focus on affordability and streamlined operations directly addresses some of the most pressing challenges faced by SMEs. By offering bundled packages like the Store Ban Bo, Star Assurance ensures that SMEs can access essential coverage at lower premiums, reducing the financial burden that often deters small businesses from purchasing insurance.
The Pokua Chatbot: Star Assurance has introduced a 24-hour channel to simulate conversation with users on insurance related issues. By sending a WhatsApp message to 0242426160 or dialling the short code *713*222#, one can access Star’s insurance services seamlessly from any part of the world and on any device.
Service Automation: Star Assurance’s services have been streamlined to make the insurance purchase and claim processes seamless for businesses. By connecting to any of Star’s online platforms, one can buy or renew a policy as well as report a claim.
Challenges Confronting Insurance Delivery to SMEs
Delivering insurance products and services to SMEs comes with its own set of challenges. One of the significant challenges is the low level of awareness and understanding of insurance among SMEs. With an alleged insurance penetration rate of less than 2% in Ghana, many small business owners are unaware of the importance of insurance, the types of coverage available, and how insurance can protect their businesses. This lack of knowledge often leads to underinsurance or no insurance at all among SMEs.
Price Sensitivity: SMEs often operate with tight budgets and may view insurance premiums as an unnecessary expense. This stems from ignorance of the benefits of insurance and the lack of appreciation of the need for premiums to reflect the true cost of risk. “Despite the minimum rates set, some insurance companies are pressured by the price sensitive nature of the market to apply low rates which result in difficulty in honouring legitimate claims when they arise.”
Perceived Complexity of Insurance Processes and Products: The complexity of insurance products can be overwhelming for SME owners, leading to a lack of engagement. Simplifying insurance products and providing clear, easy-to-understand information can help SMEs make informed decisions. As such, Star Assurance has invested in “developing digital tools that offer quick quotes and streamlines the insurance processes from policy inception to claim settlement”.
Star Assurance’s Strategies for Addressing These Challenges
To cater to the unique needs of SMEs, Star Assurance has developed specific insurance products that address the risks and requirements of small businesses. Products such as Store Ban Bo, Combined Fire and Burglary Insurance, and Business Interruption Insurance have tailored features and coverage limits, making them more relevant and affordable for SMEs.
Star Assurance has leveraged digital platforms to enhance accessibility and engagement with SMEs. The company offers online policy management, claims processing, and customer support, making it easier for SMEs to interact with their insurance provider. Additionally, Star’s active presence on social media helps educate SMEs about the benefits of insurance and the company’s SME-friendly product offerings.
Star Assurance has formed strategic partnerships with credible corporate entities to expand its reach and promote SME-centered services. These partnerships help make insurance more accessible and affordable for SMEs, particularly those in their early stages of development.
“As a demonstration of our commitment to help SMEs understand the value of insurance and how to make the most of their coverage, Star Assurance launched The Star Knowledge Series. This is a periodic social media broadcast where experienced minds in the company share insights into the various insurance processes and products. Star also has featured consistently in awareness creation campaigns and customer education programs organized by the NIC, GIA and other agencies to help close the information gap on issues of insurance.”
Without flouting regulatory minimum premiums, Star Assurance has made insurance more affordable for SMEs by offering bundled packages that combine multiple types of coverage at discounted rates. These packages, such as Asset-All-Risk and Combined Fire and Burglary Policies, are designed to meet the specific needs of SMEs, particularly those in their early stages, without compromising on the quality of coverage.
Star Assurance has simplified the process of obtaining insurance, making it more accessible to SMEs. The company offers a wide range of distribution channels, including branch and agency offices across all 16 regions of Ghana, online platforms, the Pokua mobile chatbot, and partnerships with entities like Total Energies Marketing PLC.
Requirements for SMEs to Sign Up for Star Assurance’s SME Products
To sign up for Star Assurance’s SME products, businesses typically need to provide proof of insurable interest, demonstrating a legal or financial stake in the business or property to be insured, along with a detailed description of their business operations, including industry, size, and personnel.
Additionally, SMEs must furnish information on the specific risks to be insured, such as property details, business location, and operational processes, as well as any previous insurance history.
Also, compliance with Industry Standards and Legal Requirements, very important. SMEs may need to demonstrate compliance with industry-specific regulations or standards. “It must also show documentary proof of legal registration, such as a certificate of incorporation or business registration certificate.”
By simplifying these requirements and offering digital solutions to streamline the purchase and management of policies, Star Assurance makes it easier for start-ups and early-stage businesses to access the insurance coverage they need.
Star Assurance’s Suite of Insurance Products for SMEs
Star Assurance Co. Ltd. stands out in Ghana’s insurance landscape with a diverse range of products tailored to meet the needs of various market segments, including Small and Medium-sized Enterprises (SMEs). Recognizing the unique challenges SMEs face, Star Assurance offers a suite of insurance solutions designed to protect businesses from potential risks, ensuring continuity and stability.
Motor Insurance: Motor vehicles are crucial for business operations, especially in the movement of goods, personnel, and logistics. However, their usage also exposes businesses to risks such as accidents, theft, and mechanical breakdowns. Star Assurance’s motor insurance offers four distinct coverages. These include: “Third Party Cover, Third Party Fire and Theft Cover, Comprehensive Cover, Third Party Xtra Cover”.
Fire Insurance: Fire insurance provides indemnity for loss or damage to insured property due to fire, lightning, explosions, and related perils such as floods, windstorms, and earthquakes. For SMEs, “this coverage is vital to safeguard physical assets from unforeseen disasters”.
Burglary Insurance: This policy protects businesses against loss or damage to property resulting from theft, provided there is evidence of forcible and violent entry or exit. It ensures that SMEs can recover from the financial impact of burglary incidents.
Goods-in-Transit Insurance: For businesses that frequently transport goods, the Goods-in-Transit insurance covers losses or damages to merchandise during transit due to fire, accidents, theft, or pilferage. This is particularly beneficial for SMEs involved in distribution and logistics.
Cash-in-Transit Insurance: This policy safeguards against the loss of money while being transported to or from business premises. It also covers money stored in securely locked safes or strong rooms and can be extended to include coverage for armed daylight robbery.
Group Personal Accident Insurance: This 24-hour coverage offers compensation for death or injury due to accidents, providing financial security to employees and their families. It covers permanent disabilities, loss of limbs or eyes, temporary disabilities, and related medical expenses.
Meanwhile, there are several other insurance policies which are of relevance to the operations of SMEs, some of which include: “business interruption insurance, professional indemnity insurance, plant and machinery all risk insurance, electronic equipment insurance, and travel insurance”.
Star Assurance’s Commitment to the SME Market
Since the start of 2024, Star Assurance has paid over 20 million Ghana Cedis in claims to SMEs affected by various insurable events, including fires, floods, workmen’s compensation cases, and goods-in-transit losses. These pay-outs have been crucial in helping businesses recover from potentially devastating financial losses, preventing bankruptcies and business closures.
Star Assurance has leveraged technology to enhance product offerings for SMEs, utilizing advanced data analytics to create tailored solutions, automating processes for efficiency, and providing digital platforms for easy access to services. The introduction of the Pokuaa Chatbot, for instance, allows SMEs to access insurance services and support 24/7, ensuring seamless interactions beyond regular business hours.
Advice for SMEs Considering Insurance Coverage
Star Assurance has offered a comprehensive advice to SMEs. According to Star Assurance, when considering insurance, “SMEs should assess their specific risks, understand available policies, evaluate insurance providers, and regularly update coverage to reflect business growth”. Seeking professional advice and focusing on the long-term value of insurance rather than just cost can ensure comprehensive protection that supports sustained business growth.
In all, Star Assurance has demonstrated a deep understanding of the unique needs of both large corporations and SMEs, offering tailored insurance solutions that provide comprehensive protection and peace of mind. As SMEs continue to face new and evolving challenges, Star Assurance remains at the forefront, developing innovative products that ensure these businesses can thrive in an increasingly complex world.