Pandemic Wisdom: How COVID-19 Helped MSMEs Realise the Importance of Being Insured
When the COVID-19 pandemic descended upon the world, its impact was colossal for all of humankind. It not only posed a major threat to an individual’s well-being, but it also cast its reign of terror on various businesses, sectors, and industries across the globe! Whether it be small and micro organisations or large corporate companies - none were spared from its devastating effects. The MSME sector in particular suffered enormously due to this impact, with several businesses struggling to sustain themselves, and many others shutting down for good. Therefore, these losses emphasised the significance of small business insurance, as well as insurance for micro and medium enterprises more than ever before!
Although the pandemic spread a gloom of darkness all over, the one thing it brought to light was proving how being insured could provide ample protection to MSMEs, by effectively absorbing the shock of the financial risks they had to face in these times. They realised that insurance was the saviour that could have assisted them financially, thereby helping them sail through the rough sea of COVID-19 with ease! As a result, the demand for insurance has now seen a surge in the MSME sector.
The Latest Statistics About MSMEs:
- As of 31st March, 2022, there were a total of 80,16,457 registered MSMEs in India. Of these, 1% are medium enterprises and 4% are small businesses, while micro-enterprises make up 95% of them. While these denote the registered figures, the estimated number of MSMEs in the nation is actually almost 633.9 lakhs.
- The key states with MSMEs in India are Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Rajasthan - approximately accounting for more than 50% of MSMEs in the country.
- As of FY 22, MSMEs have been contributing about 30% to India’s GDP and this contribution is expected to rise in the upcoming years.
- According to the data provided by the Udyam Portal of the Ministry of MSMEs, almost 93,94,957 people were employed in the registered MSMEs in FY 22.
(Source: IBEF)
Types of Insurance That Are Ideal for MSMEs
Availing appropriate insurance coverage is among the finest means one can undertake to protect their business. However, deciding the kind of insurance policies you need for your enterprise depends upon multiple factors - such as, the type, nature, and scale of your business, the strength of its workforce, its location, and of course, financial capability.
Below are a few examples of the varied employee health-related products that are available for MSMEs in the insurance market:
- Group Health Insurance
- Group Term Life Insurance
- Group Personal Accident
- COVID-care policies, etc.
These health covers are rather vital during the current times when personal health insurance is getting costlier owing to the increased burden on insurers. Some of the industries which experienced major hurdles during lockdown include hospitality, textile, auto ancillary, etc. due to reduced sales and scarcity of manpower. But the aforementioned group insurance policies can aid in employee retention even during tough times.
Apart from these, MSMEs can also benefit from other types of insurance such as Workmen’s Compensation Insurance, Corporate Cyber Insurance, Comprehensive General Liability Insurance, etc.
The Necessity of Insurance in the MSME Sector
- The primary concern that businesses in the MSME sector face is a liquidity crunch or a crisis in cash flow. Whatever the business, it is vital that it possesses the working capital required to allow company operations to function smoothly, make payments to employees, and experience market growth. When a company is insured, it can easily tackle and mitigate unforeseen financial risks that come its way.
- MSMEs are also quite reliant on third parties in their supply chain operations, so any financial risks or interruptions linked to the third parties can also affect the MSME businesses. Alternatively, natural calamities like floods, earthquakes, or fire can cause a lot of damage and losses to any business establishment. While it is impossible to avoid all these risks, having insurance is the ultimate solution for MSMEs to ensure financial security against losses that may arise out of the same.
At Raghnall Insurance Brokers, we have envisioned a complete ecosystem catering to the requirements of small, medium, and micro-enterprises as well as start-ups - in the form of our MSME Accelerate portal. We help insurance providers in identification and evaluation of risks unique to MSMEs, and offer expert guidance on insurance, claims management, employee wellness, finance, etc. among other associated matters.
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