Business insurance is not just a regulatory requirement, but also a way of protecting your employees, suppliers, and customers from potential threats. Properly insuring your business provides peace of mind to focus on major issues like profitability and productivity. This article aims to provide an understanding of the types of business insurance relevant to owners who have recently started a business or are considering starting one.
According to the General Insurance Association of Singapore (GIA), the general insurance sector paid out S$1.24 billion in claims across all segments for the year 2021. This represents a 5.9% increase from the previous year. The largest payouts were for motor insurance (S$460 million), health insurance (S$307 million), and employers’ liability insurance (S$206 million).
Here is a breakdown of the business insurance payouts in Singapore in 2021:
- Motor insurance: S$460 million
- Health insurance: S$307 million
- Employers’ liability insurance: S$206 million
- Property insurance: S$149 million
- Business interruption insurance: S$103 million
- Professional indemnity insurance: S$84 million
- Miscellaneous: S$131 million
The GIA attributed the increase in claims payouts to a number of factors, including the COVID-19 pandemic, which led to an increase in workplace injuries and property damage. The association also noted that the rising cost of medical care was a contributing factor to the increase in health insurance payouts. Despite the increase in claims payouts, the general insurance sector still recorded an underwriting profit of S$262.7 million for the year 2021. This was due to a combination of factors, including the increase in gross written premiums and the relatively low claims ratio.
The GIA expects the general insurance sector to continue to grow in the coming years. This is due to a number of factors, including the increasing affluence of the Singapore population, the growing demand for insurance products, and the rising cost of risks.
Whilst the GIA does not publish figures on business insurance shortfalls. However, there are a number of estimates available online. One estimate, from the Singapore Business Federation, suggests that the average business insurance shortfall in Singapore is around S$100,000. This figure is based on a survey of 100 businesses.
There are a number of factors that can contribute to a business insurance shortfall. These include:
- Underinsurance: This occurs when a business does not have enough insurance to cover its potential losses.
- Excluded risks: Some insurance policies exclude certain types of risks, such as cyber-attacks or business interruption. If a business experiences a loss that is excluded from its policy, it will not be covered.
- Late reporting of claims: If a business fails to report a claim to its insurer within the required time frame, it may not be covered.
- Policy limits: The policy limits on an insurance policy are the maximum amount that the insurer will pay out in the event of a claim. If a business’s losses exceed the policy limits, it will be responsible for the remaining amount.
Businesses can reduce the risk of a shortfall by ensuring that they are adequately insured, reviewing their policies regularly, and reporting claims promptly.
About Business Insurance in Singapore
Business insurance can be classified under three general categories in general, including property, employees, and legal liability. Property insurance covers loss or damage to business properties such as buildings, plants, machinery, equipment, stocks, furniture, fixtures, and fittings. Insurance plans can cover fire, theft, terrorism, and business interruption.
Employees can be insured through work injury compensation insurance and basic health insurance. Work injury compensation insurance provides cover for claims for injuries or diseases suffered by employees while working. The Work Injury Compensation Act requires all employers to purchase work injury compensation insurance for local or foreign employees doing manual work, regardless of salary level, and non-manual work earning up to $2,600 monthly.
The Employment Act requires all employers to make CPF contributions for all Singaporean employees, a portion of which will be allocated to MediShield Life, basic health insurance for Singaporeans. Employers of S Pass and Work Permit holders are required to purchase medical insurance plans for them, and employers of Employment Pass holders can voluntarily choose to purchase private medical insurance as part of their employment benefits.
Legal liability insurance can provide coverage for compensation due to acts of negligence by employees in the course of their work. Public liability insurance can cover bodily injury or damage to property and premises resulting from business operations, manufacturing, distribution, or sales of products. Director and officer insurance can provide indemnity to the key decision makers in a company who may be held liable for breach of duty or negligence. Professional indemnity insurance provides coverage against legal liability arising from acts of negligence for professionals such as auditors, lawyers, and accountants.
Businesses can reduce the risk of a shortfall by ensuring that they are adequately insured, reviewing their policies regularly, and reporting claims promptly. Here are some tips for businesses to reduce the risk of a business insurance shortfall:
- Get professional advice from an insurance broker.
- Review your insurance policies regularly to make sure that they are still appropriate for your business.
- Consider purchasing additional coverage for risks that are not covered by your standard policy.
- Report claims promptly to your insurer.
- Keep good records of your business’s financial transactions.
By following these tips, businesses can help to protect themselves from the financial impact of a loss. Business insurance protects not only the business owner but also the employees, suppliers, and customers. It is a critical aspect of running a business, providing peace of mind to focus on major issues and ensuring that business operations continue in the face of potential threats.