A considerable number of small and medium enterprises overlook the importance of insurance coverage. As many as 50% SMEs operating in the UAE are inadequately insured, according to Gargash Insurance managing director Mustafa Vazayil.
Yet, various crises, such as the Global Financial Crisis in 2008 and the COVID-19 pandemic a decade later, have underscored the crucial role of insurance, particularly for small and medium enterprises.
SMEs armed with credit insurance during those times were somewhat shielded from unexpected revenue setbacks. Business owners could meet some of their financial obligations through insurance despite business closures and the challenges of bad debt, Mr Vazayil told Khaleej Times.
He said, “Various factors contribute to this situation. Primarily, SMEs lack a comprehensive understanding and appreciation of the risks associated with their operations. There’s a deficit in knowledge regarding insurance products and awareness of the risks stemming from business and trade activities. Credit risk is ingrained in the operations of numerous businesses. Additionally, emerging risks like cyber security compound the situation.”
By 2030, it is forecast that about a million SMEs will be operating in the UAE. This marks an 80% increase from the 2022 number of over 550,000.
“This is a free market. I don’t believe regulators in the UAE would opt to mandate specific types of insurance for SMEs. It is within the purview of businesses to evaluate their risks and make decisions. We can’t have a situation where everything is mandated. The free market doesn’t operate in that manner,” he said.
Businesses need to comprehend that insurance is not a luxury but a necessity, Mr Vazayil said.
“However, businesses should bear in mind that ‘cheap’ does not always equate to the best option. When embarking on a new business venture, cost-consciousness is understandable. Nonetheless, this should not compromise the selection of a provider or the policy purchased. Businesses must ensure adequate coverage,” he said. M