Shifting risks for SMMEs demand new approach to small business insurance cover

SMMEs – typically the most vulnerable of commercial enterprises – must fortify themselves to both survive and take advantage of an evolving business landscape. From rising inflation, geopolitical conflicts and a recalibration of global trade hierarchies – to technological breakthroughs and rising climatic risk, the pace of change is unrelenting.

 In response, a shift is underway within the local SME insurance landscape – from traditional, reactive cover to proactive, tech-enabled solutions that cater for multifaceted risks and provide greater accessibility for small business owners. Several emerging trends are powering this change.

Tech-powered innovation

While the majority of SMMEs are owned by older entrepreneurs (45 to 54 years old), 30% of South Africa’s SMME owners are younger than age 35. These tech savvy SMMEs expect the same seamless digital experience from their daily grocery delivery provider as they do from their insurer.

Insurers are fast-tracking the adoption and integration of digital tools to improve efficiency and customer service across all areas of the business. Additionally, AI is supercharging big-data usage – allowing insurers to create hyper-personalised policies. For SMMEs, this will impact traditional cover types such as Key-Person insurance which can now be tailored at a granular personal level.

Addressing accessibility

According to the FinScope MSME Survey South Africa 2024, only 18% of SMMEs have business insurance – with most owners seeing it as a grudge purchase.

Insurers are increasingly highlighting that business insurance is not only a life raft during times of crisis, but an enabler of commercial longevity and scalability.

Efforts to reduce accessibility barriers are also increasing with many insurers using embedded insurance models to drive take-up. Insuretech partnerships are also reducing barriers-to-entry by offering agile, on-demand products.

Proactively responding to emerging risks

Eight in ten business respondents surveyed in Santam’s 2024 – 2025 Insurance Barometer Report said they had been negatively impacted by emerging risks over the past two years. Economic change, poor infrastructure, political unrest, climate change and cybercrime were among the top five risks highlighted.

SMMEs are particularly vulnerable to economic pressures. The insurance industry must find innovative ways to offer supportive risk mitigation and transfer solutions to small and growing businesses. Off-the-shelf products suited to SMMEs can help maintain coverage while addressing affordability pressures. Santam’s new SmartSME uses simple onboarding to bring more entities into the insurance fold.

The rising severity of climate-related destruction – exacerbated by deteriorating infrastructure – is another key concern. SMMEs have been particularly impacted by local power and water issues, supply chain constraints caused by rail and port deterioration and climate change impacts. Insurers are working proactively with customers and brokers on risk mitigation measures, partnering with local municipalities to bolster infrastructure maintenance and disaster risk readiness, as well as using technology to better understand risk hot spots and price accordingly.

Cybersecurity also poses a growing risk for SMMEs. While cyber insurance is viewed as expensive, premiums are dwarfed by the losses that arise following a data breach or ransomware attack. Insurers must work with brokers to more effectively explain the cost-to-coverage trade-off available in this emerging insurance class.

The increasing appetite for human connection in a complex digital world

Finally, the value of quality advice, understanding and human connection is increasing as AI and other technological innovations both simplify and complicate our world.

70% of SMMEs turn to brokers for advice on complex risks. This will increase as the risk landscape continues to grow in complexity, providing an opportunity for brokers to grow their risk advisory prowess to guide SMMEs through an increasingly complicated business environment.

Thabo Twalo, Chief Underwriting Officer: Santam Broker Solutions

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

BUSINESS REPORT