Why you should insure your business

When Minet Kenya partnered with Fidelity Insurance to launch of Biznasure, a pfroduct targeting SMEs amidst emerging risks and changing macro-economic environment on April 20, 2023. [David Gichuru, Standard]

On Thursday last week, Minet Kenya, in partnership with Fidelity Insurance unveiled a business cover for Small and Medium Enterprises(SMEs).

The cover targets business owners with an all-in-one package insuring them against risks such as breakdown of machinery, deteriorating stock, money lost in transit, theft, litigation from workers or competitors political violence among others.  

Minet Kenya Chief Executive Sammy Muthui shared his thoughts about insurance penetration among SMEs, how this gap can be closed, and why business insurance is akin to health coverage. 

You have several products that specifically target SMEs. Why is this market segment important for your business?

There are about 7.4 million SME businesses in Kenya and they employ up to 94 per cent of the working population and contribute 24 per cent to the gross domestic product (GDP).

The penetration rate within this sector is so low that generally speaking many of them go uninsured and they are very much exposed when it comes to risks. Just one incident takes them out of business yet they are the biggest employer and the backbone of the economy.

For both sustainability of the businesses themselves and the goodness of the Kenyan economy, we must protect them from the perils that may affect them.

Do you also work with micro SMEs?

We not only work with SMEs. We also serve the micro market through innovative solutions targeting that segment.

About two years ago, we came up with a product known as ‘RaidaSure’ that covers bodaboda riders in case of injury, damage to their motorcycles and third-party property and passenger liability arising from a PSV bodabodas.

What are some of the reasons that make the penetration of insurance in this sector to be low?

One of the reasons is the lack of information and knowledge. There has not been enough consumer education although I must commend the Insurance Regulatory Authority(IRA) because their Bima Mashinani campaign has educated more Kenyans.

But still, the level of knowledge among business owners in the SME sector is still very low. Insurance literacy is very low.

Many people sometimes when they pay for insurance coverage, and there is no incident after the year has ended and they feel it’s a waste of money.

They forget the premiums are there to take care of you in the case of unforeseen events or risks. And when that disaster strikes that day, that is when they will appreciate the value of insurance.

But many times when they go without claiming, they will not.

How critical is insurance for a small business?

While some business owners may believe, insurance is an unnecessary expense, and that is where the problem lies. The truth is the cost of not having insurance, the cost or lack of protection, is much higher, it is equivalent to our own personal health. The cost of not preventing bad health is much higher than the cost of actually going for that check-up.

It is the same insurance. Without adequate insurance coverage, SMEs will struggle to recover from losses and even be forced to close their business permanently.

The majority of SMEs are ‘one-man army’ businesses where the founder is everything in the entity. How do you navigate this when you engage them on matters insurance?

Most SMEs have that key feature where the entrepreneur or business owner, is the business vision carrier or, is the managing director, the human resource director or the finance director. Of course, many expand and create more capacity in terms of management.

The most important thing we do is tailor-make products that assure that business of continuity and growth. The reason we have this BiznaSure solution is to ensure such a business has sustainability, longevity and growth.

The business is protected even if it outgrows the original owner.

It is not a mean feat to start a business, especially a small business, particularly on capital that many start as them in home offices before may be renting out a place. Also, the lifespan of SMEs is unpredictable as some do not survive past the first three years.

When is the right time for an entrepreneur to take insurance?  

The very right time is at the very beginning when you are conceptualising your business. The day you start, the risks start coming in.

You know the way you start your business, you pay for a license or you plan for finance, isn’t it?  When you plan to pay for a certain license, that’s the time to also buy insurance.

It should be considered the first thing you do before you start a business.

Normally, and unfortunately, because of lack of adequate knowledge, people now think of insurance well after they have started, and sadly many times when they have incurred losses and they are unable to get compensation.