Better business insurance

By Schalk Malan, BrightRock CEO

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Small businesses are at the heart of South Africa’s economy and of many financial advice practices. The Small Business Institute (SBI) has found that 98.5% of our economy is made up of small and medium-sized enterprises (SME), which contribute more than 40% of South Africa’s gross domestic product. As the majority of these small businesses operate in the agricultural trade, tourism and construction industries, entrepreneurs face many risks: these are typically owner-managed businesses requiring a hands-on approach.

In the early stages of a business, entrepreneurs have to juggle the conflicting demands of large capital expenditure, a significant debt liability and limited cash flow. It’s vital that insurance premiums are as low as possible while offering the right protection. Most small business owners need risk protection with a high degree of flexibility to ensure their cover remains relevant and affordable as their businesses grow and develop. From BrightRock’s point of view, this is a huge opportunity for insurers and financial advisers alike. There’s a great demand for our industry to deliver more efficient product structures that better address entrepreneurs’ changing needs.

Traditional business insurance benefits can be inflexible and inefficient. They tend to cater to all long-term risk needs in a single capitalised lump sum, priced for the maximum term (whole of life) and structured to grow over time. The problem with this approach is that all businesses have unique profiles, depending on the needs of the client, so a one-size-fits-all-solution may fall short. Most business insurance needs exist only for a set term; a debt may be paid off or a key person risk may reduce as the business grows.   

Efficiency and flexibility are central principles we’ve tried to incorporate into BrightRock’s insurance products for business owners. By matching the duration and behaviour of cover exactly to that of the business owner’s underlying financial needs, BrightRock can remove unnecessary premium waste. With us, the cover for a debt liability can reduce over time in line with the diminishing outstanding balance as the debt is paid off. Once the debt has been settled, the cover for that specific debt can automatically fall away; a reduction in risk need that we price into the premium from day one.

We find this efficient approach allows business owners to get more cover for their money, so they can close gaps in their coverage while minimising expenditure. This is just one example of how business insurance cover can be structured to maximise efficiency and affordability. Of course, just as certain needs may reduce over time, others may increase. That’s why the ability to buy up cover later on – free of underwriting – is another important feature that comes standard with BrightRock’s cover for business insurance needs.

Long-term insurance for a small business: what should be covered?
Contingent liability insurance for major debts Insurance for buy and sell agreements Key man insurance
Contingent liabilities are liabilities that may be incurred by an entity depending on the outcome of an uncertain future event, such as a serious illness, debilitating injury or death. This will ensure that co-owners of the business can continue to operate the business in the event of the death or permanent disability of a business owner. It also ensures the deceased’s estate receives fair value for their business interest and the settlement of their credit loan account. An insurance policy taken out by a business to compensate the particular business for financial losses that would arise from the death or permanent incapacity of an important member of the business. 

1. The number of formal micro, small and medium businesses in South Africa (link here)

2. Small business in South Africa (link here)