Holistic SME protection solutions for unforeseen circumstances

Small and medium enterprises (SME) are one of the key areas of growth for vision 2020 and is expected to contribute up to 41% of Malaysia’s GDP by 2020.

According to Second Finance Minister Datuk Seri Johari Abdul Ghani, 98% of businesses in Malaysia are SMEs and he sees the importance of SMEs for the Malaysian economy which contribute almost 36% to the country’s GDP.

Looking at this significant contribution to the economy, he stated that the Malaysian Government may increase fund allocation for SMEs under Budget 2018 to further develop SMEs and support broader economic activities.

Prudential Assurance Malaysia Bhd (PAMB) recently introduced a business solution called PRUbiz beyond that focuses on protecting SMEs against uncertainty and risk. While the majority of SMEs will typically have insurance to protect their assets, such as their premises, stock, and vehicles, the human asset of the business is often left uninsured, potentially threatening the future growth of a business.

Nearly all businesses have one or more ‘key person’ 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.

PRUbiz beyond by Prudential is a specially designed proposition for SMEs. It provides tailored life insurance solutions that protect SMEs against the death, disability and critical illness of a key person by providing Keyman protection, Credit Risk protection and Business Continuity protection.

Keyman protection

Keyman coverage insures the business against the financial loss resulting from the premature death of a key executive. A small business could suffer a disruption in sales, creditor confidence, and customer relationships as a result of the loss.

In addition, the business could incur significant expenses for recruiting and training an experienced successor.

Keyman Protection helps to manage these risks and ensures the company has sufficient funds to keep the business going in the short term before a successor takes charge.

Credit risk protection

Should an unfortunate event of death were to happen to a business owner, 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 in the unfortunate event of a premature death of the key person/ guarantor.

Business continuity protection

Business partners and shareholders are the backbone of the business. If a business partner or major shareholder dies, the family of the deceased partner is 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 continuity protection will ensure that the interest in business is properly protected and smoothly transferred to the heirs in the highest value.

It also allows a smooth transition and succession of the business interest minimising unnecessary interruption to the business continuation. This in return will instill confidence into employees, suppliers, customers, banks and others.

There are no doubts 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 of their business with robust business protection planning as presently many view insurance as an unnecessary expense, while others who may believe it to be important, see it more as a luxury instead of a necessity.

The fact is that SMEs need to realise that insurance is a necessary investment, rather than an ancillary cost.

PRUbiz beyond comes with various added values through partnerships with established partners such as RHB Trustees, Baker Tilly, Cycle & Carriage Bintang, KDU University College, CIT Travel and Oris. These partnerships are meant to complement and support the entrepreneurs in providing them with a business solution that can access to various services be it tax advisory, trustee services and even lifestyle privileges.

It gives confidence and a peace of mind to SME entrepreneurs while delivering the best service to their customers.