Isaac Mphasha, Risk Manager, Bryte Life
Small and medium-sized enterprises employ the majority of South Africans. By some accounts, up to 60% of the employed population work for SMMEs. Analysts are in broad agreement that SMMEs form the backbone of the country’s economy, and policymakers consistently emphasise initiatives to support small business growth. In the private sector, large firms leverage policies and frameworks such as B-BBEE and ESG to develop smaller businesses across their supply chains.
However, while SMMEs are front and centre of the national conversation around job creation and economic growth, the SMME market still needs to be addressed by the insurance industry when it comes to tailoring and marketing attractive group risk products.
SMMEs have historically been excluded from group risk due to the minimum premiums and membership requirements of most Group Risk policies. While this has left SMMEs underserved, it also means that there is a vast untapped market for insurers.
Simple solutions for a complex market
Traditionally, the SMME market has been considered difficult to insure. In many cases, however, significant progress could be achieved by introducing simple, suitable products, such as funeral policies, and building from there, introducing appropriate, limited life and disability covers. In other words, the problem is less the inherent complexity of the sector than a mismatch between what employees and business need and the products available.
By providing carefully tailored products, the insurance industry will be positioned to serve a meaningful purpose, enabling anyone in the formal employment sector access to reasonable cover for death and disability benefits, with a minimum level of medical underwriting.
Secondly, the industry needs to step up efforts to educate employees and business owners about the benefits available to them. There still needs to be more awareness despite an evident and urgent need. Financial advisers and smaller practices are especially well-positioned to service the SMME market, providing personalised education and support.
Providing a foundation of support
When considering the SMME sectors’ insurance needs, we must also consider how the COVID-19 pandemic has changed the risk landscape. Increasingly, small business owners are finding that when an employee dies, there is an expectation on the side of the family to assist with the funeral cost and monies for daily living. This is a high priority in many cases, as the deceased was often the primary breadwinner.
Group risk remains very important for this segment, offering death and disability benefits at a reduced cost with little to no underwriting.
Insurers, therefore, have a central role to play in ensuring that small businesses can provide for their employees’ needs and help mitigate the broader social and economic consequences faced by families who lose a loved one.
SMMEs can only play their vital role in the country’s economy if they have the support they need to operate sustainably and if their employees – and their families – are assured of adequate economic security. Insurance companies and financial advisers need to come together to develop effective, accessible insurance solutions for the large majority of South African workers.