2022-11-28

Significance of Group Health Insurance for Emerging SMEs & Start-ups in today’s 5G era of digital adoption

By Swarnali Saha
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By Biswa Dipak Tripathy, Banking & Insurance Veteran, Heads Zones at Onsurity Technologies for Business Expansion - South & West believes managing safety and health is an integral part of managing an SME & Start-up business.

The SME sector is a critical nerve center for the Indian economy, owing to it contributing 30% of India's GDP while turning out a million jobs every year. Most small businesses tend to be entrepreneurial ventures where the promoter has either invested their savings or borrowed funds to start their dream venture.

Two years ago, just when the world was riding high on digital transformation, several industries were struck hard by Covid-19. One of the hardest-hit sectors was manufacturing.  Many businesses came to a standstill as the deadly Covid-19 waves claimed lives and people were restricted to staying at home. While digitally enabled organisations managed to cope by allowing WFH (work from home) and hybrid work models, manufacturing companies could not immediately do so since the nature of work is manual workforce oriented.

As a result, employee safety became a matter of serious concern. Manufacturing output plummeted and many small and medium-sized enterprises were left in shambles, leading to even more disastrous effects. The pandemic not only halted their sustainable and inclusive growth but also put the spotlight on the need for group health insurance for employees

Given their small financial and business size, SMEs are especially vulnerable to risks threatening the venture. Surprisingly, the employees of SMEs do not have health coverage or other core property risks like business interruption, fire, marine, etc. Lack of awareness, coupled with thin margins, makes insurance a low priority, and business owners often neglect insurances the law does not mandate. While insurance can be an expensive investment in the tight budget an SME runs, it could save massive amounts if a disaster ever strikes.

Why is Group healthcare insurance essential for MSMEs?

MSMEs realize that in view of the current state of healthcare, it is important to provide an affordable and valuable healthcare package to their employees which covers both mental and physical health. According to CII data, the manufacturing sector currently contributes 16-17 percent to the GDP and gives employment to around 12 percent of the country’s workforce. The data also points out that India is emerging as a lucrative and credible investment destination for manufacturers due to its robust domestic demand, growing middle class, young population, and high return on investment.

Many often view insurance as a complicated and confusing subject matter. Purchasing insurance is nothing but purchasing protection. Though the extent of shock absorption in the time of loss varies from policy to policy, the financial cushion insurance provides promises peace of mind.

Protection during cash flow crisis

Due to their limited cash flow source, SMEs are prone to unforeseen financial risks that could harm their operations and ability to pay their employees and grow in the market.

Risks due to third parties

Financial losses due to unexpected events such as explosions, fire, natural calamities, riots, theft, etc., could even potentially lead to the business's downfall.

Protection from legal liabilities

Fending legal proceedings is pricy, especially for a small business that could already be burning through its proprietor's life savings. It is vital that they can pay for any damage the employees, or the company has caused to their customers.

Here are some of the insurance covers that are a must-have for all small businesses today:

Worker's Compensation Insurance: If a work-related accident renders an employee unfit to work, insurance will help protect the workers this incident affects.

Equipment Breakdown Insurance: Computers, electrical/electronic, and mechanical equipment are bound to wear & tear, causing repairs. This insurance can help your business from the cost these damages bring about.

Office and Shop Insurance: This insurance offers comprehensive coverage for threats that affect the office operations' impact and provides financial aid against any damages to the building structure and the contents within.

Liability Insurance: This insurance protects the business in the event of property or bodily damage to the workers or customers that visit the company. While businesses with rare personal visits may choose to omit this insurance since the chances of an injury on their property are remote, businesses with regular foot traffic, such as retail stores or warehouses, should consider this an essential part of their insurance policy.

Stock & Goods Insurance: If the business has a factory that trades or stores raw materials to make its products or if the company is unable to function without the materials in its inventory, this insurance is a must-have. The insurance will provide a replacement value against the damaged goods at the time of need.

Business Interruption Insurance: If the business ends up getting shut down for a short span of time due to unforeseen external forces, this insurance will make sure to pay the lost income, and the business stays afloat during the crisis.

Conclusion: Employers must ensure employees’ physical and mental well-being to become the projected $5 trillion economy. Moreover, employee productivity and workforce health should be prioritized, especially in the manufacturing sector, where work hours are long and pay scales are low. Companies must offer comprehensive medical cover that includes both parental and spousal benefits for employees. Moreover, industry forums should join hands with the Government to come forward and address issues across the manufacturing spectrum to facilitate growth and enhance efficacy and competitiveness to achieve higher output levels by keeping employees safe.

It makes sense for manufacturing companies to invest in group health insurance, providing easier access to health infrastructure and protecting employees both in the workplace and outside.

Since businesses are different and may utilize diverse resources, it is imperative that the business owner understands the potential risks to know what insurance best suits their needs. While all of the above insurances may not be relevant for all SMEs, it is crucial to ensure that business owners do not neglect group healthcare insurance since it is not mandatory by law. Insure right to avoid loss.

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