An editorial in this newspaper recently opined that the time had come for property insurance to be made mandatory. In light of the many house fires and other disasters of late, property insurance was being proposed as a measure for homeowners to safeguard against the loss from such disasters.
In a similar vein, consideration should be given by business owners for the procurement of adequate insurance coverage as a risk mitigation measure for their businesses. This should be a mandatory business acquisition.
As the current year comes to an end, many will be making plans at the individual and institutional levels for the new year. Business Basics is this week advocating that insurance coverage should be at the top of the to-do list for small business owners.
A business case can be easily made for insurance as a risk mitigation measure for the firm. The recent disruptions to business caused by natural disasters and the changing weather patterns, arguably a consequence of climate change, necessitate that firms build resilience in their operations and at the very minimum, be able to recover should disaster strike. The ultimate objective is to protect the assets of the firm and to ensure business continuity. The insurance policy can be used to cover a diverse range of risks, including property damage, liability, injuries, theft, and loss.
Though data is not readily available on the level of business insurance coverage in Barbados, executive vice president and general manager of Sagicor Life (Barbados) Inc., Paul Inniss, speaking on this issue in another section of the press, gave some insight worthy of analysis. He posited that the average market penetration rate for insurance in developed countries was 3.8 per cent in 2019, while in Barbados, this rate stood at 2.7 per cent, with Trinidad and Tobago and Saint Lucia recording 2.8 per cent and 2.3 per cent, respectively. Inniss also mentioned that globally, 3.8 per cent was considered below the ideal rate, indicating that the Caribbean markets were lagging significantly behind.
Furthermore, the insurance executive emphasised the risk of underinsurance for individuals and families, citing examples of the financial difficulties that could result from serious illness, disability, or death without adequate insurance coverage. He also stressed the importance of public education and the responsibility of companies like Sagicor to work towards increasing the level of coverage throughout the Caribbean region.
While there was no specific mention of small businesses in the provided information, it can be extrapolated that the below-average penetration rate in the market for insurance coverage in general, includes the underperformance of small firms in accessing insurance coverage.
Though a 2.7 per cent market rate may be below that of the developed world, an International Monetary Fund (IMF) report indicates that Barbados has a high level of insurance penetration as a percentage of GDP. The data suggested a rate of 7.4 per cent of GDP, ranking the country 16th in the world for this measure with high premiums per capita at US$692, and a ranking of 28th in the world. This was second only to The Bahamas in the region. Again, this data represents coverage in general and does not address business insurance, particularly at the level of small firms.
In comparison with other Caribbean countries, Barbados ranked 79th in the world for total premiums in the insurance market, with a total of US$184 million. This ranked below Trinidad and Tobago (US$424 million), The Bahamas (US$321 million), and Jamaica (US$303 million).
What can be gleaned from the IMF report is that Barbados has high premiums per capita and an average market size among developing economies. There is also a positive perception and high level of coverage amount provided by insurance firms. Reinsurance sessions are notably high for property insurance, at between 85 and 90 per cent of premiums for the industry as a whole. Business insurance, however, lags behind acceptable levels.
A scan of insurance providers in the local market revealed several products available to small businesses. One such insurance provider, Sagicor, offers various types of coverage such as group marine insurance, commercial property insurance, a Caricare advantage plan for frontline heroes, group liability insurance, group motor insurance, group accident insurance, and group life and health insurance.
Sagicor’s comprehensive business solutions and insurance offerings suggest that there is a recognition of the importance of insurance coverage for businesses in Barbados and the wider Caribbean region. Based on the information provided about their Small Business Package designed specifically for small to medium enterprises with fewer than 25 employees, product offerings include comprehensive insurance coverage, such as protection against fire and other perils, accidental damage cover, public liability insurance, employer’s liability insurance, loss of money insurance, additional expenditure/loss of rent insurance, fidelity guarantee insurance, goods in transit insurance, and plate glass protection.
The level of coverage amount by insurance firms would likely vary based on individual business needs, regulatory requirements, and industry-specific factors.
What is evident is the need for improvement in the level of business insurance among small businesses in Barbados and the Caribbean. Insurance firms must work with other stakeholders to increase coverage and public education and improve the overall perception and level of coverage among businesses.
This is a clarion call for small firms to resolve that insurance coverage is a necessity and every business should make this a priority in the new year. The data revealed that our market penetration is too low, at a time when our region is too vulnerable to climatic events. Let us use insurance coverage to mitigate risk, protect our investments and assets, and ensure business continuity.
The Small Business Association of Barbados (www.sba.bb) is the non-profit representative body for micro, small and medium enterprises (MSMEs).
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