Small and medium sized enterprises (SMEs) in the Middle East are leaving the very existence of their business at risk by failing to put in place protection against the loss of a key person within the organization. The risk is highlighted by Zurich International Life, which today launched a first-to-market life insurance proposition called Zurich Business Protect, designed specifically to protect SMEs in Bahrain, Qatar and the United Arab Emirates.
While the majority of SMEs will typically have insurance to protect their assets, such as their premises, stock and vehicles, the human asset of a business is often left uninsured, potentially threatening the future growth of a business.
Nearly all businesses have ‘key persons’ whose skills and expertise make them difficult to replace. Often, these people are business owners, but they could also be a Managing Director, CFO or Sales Manager. The absence of these key persons can be the biggest single risk to the profitability and even the very existence of a business – especially for SMEs where the relative impact will be much greater. SMEs, defined as businesses with less than 250 employees and an annual turnover of less than Dhs250m ($68mn) play a key role in the region’s economy. In Bahrain for instance, it is estimated that 87.8% of all companies have no more than 10 employees, supply 73% of all private sector jobs and contribute to 28% of GDP.
Zurich notes that the loss of a key person at an SME could not only have an adverse impact on profitability, it could also impact the ability of the surviving business owners to pay out business liabilities and sustain the life of the business.
“Life insurance products are one of the least understood and used solutions for business planning,” said Jawed Barna, CEO of Zurich International Life MEA. “At Zurich we are committed to delivering customer centric solutions. As a result of extensive market research, we have designed a proposition for SMEs in the region culminating in the launch of Zurich Business Protect. It provides tailored life insurance solutions that protect SMEs against the death or critical illness of a key person by providing Key Person, Liability and Partner protection,” he added.
Zurich Business Protect typically protects an SME against three scenarios:
‘Key Person’ Protection
The loss of a key person can cause a business to be hit by a loss of profit, reduced sales, recruitment/training costs and disruption to their plans, to name but a few potential problems. Business protection solutions provide the SME with a life insurance plan, with optional critical illness cover, written on the life of the key person.
If one of the business owners is diagnosed with a critical illness or dies, it could affect the business’ ability to repay a loan or personal guarantee that could put the business’ profitability at risk. For instance, a bank may decide to recall a loan or take control over assets that would impact the business’ sustainability. Business protection provides liability protection that ensures the SME can repay money owed if a key person dies or is diagnosed with a critical illness.
If a business partner or major shareholder dies, the family of the deceased partner are likely to inherit their share of the business, while the surviving partners may struggle to find the funds to buy out the family’s share. Business protection allows the surviving partners to keep control of the business, while providing the family of the insured key person with financial security.
Barna concluded, “While there is no doubting that the SME sector will continue to be a major driver of business growth across the region, business owners would do well to keep an eye on the future sustainability their business with robust business protection planning.”
For more information please contact:
Head of Communications, Middle East & Africa
Zurich Insurance Group
Liam Turner / Ajith Henry