Experts: Why insuring your SME business is imperative

Monday March 01 2021
SMEs pic

Workes at a local factory. PHOTO|FILE

By Gadiosa Lamtey

Dar es Salaam. Small and Medium Enterprises (SMEs) need their own insurance packages to hedge them against probable losses, experts have said.

Experts in insurance who spoke to The Citizen say a number of SMEs wind up prematurely because insurance companies have not designed products that specifically cater for the market needs of such businesses.

SMEs have unique business demands compared to larger and more traditional organisations, the experts argue, proposing that businesses in that category need different insurance solutions that will address their challenges.

Well designed, such insurance products will effectively protect SMEs against risks such as fire, theft and other unforeseen occurrences.

Tailor-made insurance solutions will also help SME operators to expand their businesses with confidence and peace of mind as they are rest assured that in case of any unanticipated occurrences, they will be covered.

As SMEs grow, their insurance needs will increase for both their businesses and employees, who will require health insurance, life insurance and other staff related covers.


“For instance, producers, processors, retailers, service providers and construction companies require different needs, but currently, they are being offered similar products, which are not responsive to their needs,” says the managing director for ACCLAVIA Insurance Brokers & Risk Consultants, Mr Ancelim Anselim.

The market, he said, needs to invest in research and development in order to offer products and solutions such as fulfilling requirements to mitigate loan default due to disability or death of directors or other senior officers.

The one-size-fits-all approach cannot work in as far as insurance for SMEs is concerned, he stressed.

“It is through research that insurance companies will be able to serve them effectively….They must also create products that are affordable,” he said.

It is basing on such a background that Sanlam Life Insurance will introduce an affordable product for SMEs starting April this year, according to the firm’s chief executive officer Mr Khamis Suleiman.

The firm’s new product will cover four items including fire, personal accident, theft of items and theft of cash.

“SMEs with about Sh5 million in capital are many and often they face the challenge of being robbed of property or money so we believe such kind of cover will help them,” he said.

Currently, the firm is in talks with mobile companies so that people can pay for their insurance via mobile phone which is easy for them.

Tanzania Insurance Regulatory Authority (Tira) says through its micro insurance provisions, SMEs can be able to access a number of products that are in line with their needs and requirements, according to Tira’s acting director for planning, research and market development, Mr Muyengi Zakari.

“Our responsibility is to approve the applications of insurance companies in relation to the new product that they intend to offer and their benefits but with the huge number of SMEs, we have to consider the master plan development,” he said.

According to a FinScope Tanzania 2017 survey which was conducted by the Financial Sector Deepening Trust (FSDT), Tanzania was home to approximately 3.7 million micro-enterprises, out of which, 70 per cent are retailers.

However, it was only 29 per cent of the businesses that had insurance cover.

From the 71 percent of SMEs who do not have insurance, 37 percent said they could not afford it and 24 percent said they had other priorities as reasons why they do not have insurance. These findings clearly show the untapped need and potential market for insurance education to elevate the importance and benefits of insurance solutions to SMEs.

“The increase in the uptake of insurance by SMEs will contribute to the penetration of insurance, which will over time increase the overall awareness and confidence in insurance as an alternative risk mitigation mechanism for SMEs and their various stakeholders. At the macro level, the increase in insurance uptake and collection of insurance premiums contributes to the economic growth and development of the country through the short- and long-term investments made by the insurance industry,” read part of the report.