3 tips for SMEs mitigating risk through insurance


By Neer Rama, Force Solutions Product Manager at thryve Canada

Smaller is often better, especially when you don’t want to be a target. But as technology levels the playing fields, giving medium-sized businesses the capability to play in bigger leagues, it’s also started to erase that anonymity. Smaller companies are wising up to the reality that their size no longer protects them and, instead, the risks they face can be much more catastrophic to their well being than to larger organizations that can absorb more blows.

Every business – not just large listed enterprises – need to pay closer attention to their risks and how to mitigate those. Paying for business continuity and cyber-incident insurance is a popular way to mitigate many of those risks. Yet if you’re not careful, you might not get enough coverage.

How can you make sure your coverage meets all your requirements? I can offer three tips to get your thoughts rolling:

Don’t be underinsured

In 2016, a Deloitte paper estimated that Canadian small businesses are underinsured by as much as $2.2 billion. This typically happens because companies are a) not willing to pay for better coverage or b) don’t realize they are not sufficiently covered. Both emerge from underestimating risk and thus opting for generic insurance packages. Such policies can be a good start but do not necessarily include specific problems your operations can encounter.

Policies typically cover named risks, so you must identify the specific risks that can affect you, including supply chain problems. If you can’t cover all your risks, cover the ones most likely to cripple your business. It could be a fire, but it might also be a shortage from your supplier. Don’t assume a generic or even comprehensive policy will necessarily cover your needs.

Use a broker who can be a team player

It’s very convenient today to buy insurance, often only taking a few minutes on a website. And it’s very tempting for SMEs with constrained resources to select this route, as it’s more convenient and often cheaper. Yet, as my previous point noted, that does not translate into covering the risks pertinent to your company’s survival. Larger organizations can expect hands-on attention from brokers who take the time to understand their client’s operations, or at least to grasp the pain points their client brings up.

Having a broker on call is an added expense. But industry trends, such as disintermediation, are prompting brokers to be more hands-on with smaller clients. They leverage technology to give them that agility, and progressive brokers are using this reach to meet smaller companies’ needs without bloating their costs. You can expect an insurer to take your business as seriously as any larger client – and if they don’t, there are competitors that will. Take advantage of that expectation.

Manage risk proactively

The above two points come down to something that must happen culturally within your business: you need more robust risk management. Knowing risk is an integral part of running any company. Yet there is a difference between being aware of risks and managing them proactively. You can realize considerable insurance savings if you have a nuanced view of your risks.

Cloud-based enterprise risk management applications, such as Xactium, put this heightened ability in the hands of medium-sized companies. They can be funded through monthly operational costs and scaled to fit the size of the business. They provide integration and multiple business-facing interfaces to gather risk-related information from different corners of the company.

Small and medium enterprises face greater risks than before, and their situation is even more precarious after the COVID-19 pandemic. Insurance remains an effective way to deal with those risks, but it must be conceived and managed at a nuanced level that fits the company’s profile. You can combine enterprise risk management and proactive brokers to identify your blind spots, tailor your policies and still keep your costs down.

It starts with a proactive attitude towards risk, a broker willing to get involved, and the power of cloud technologies that offer enterprise-grade risk management at an SME budget. Contact thryve today, and let’s discuss how we can help you put these pieces into place.