AIG has revealed the biggest risks facing SMEs in 2016, presenting brokers and insurers a host of opportunities.
The international insurer noted that internal factors, such as workplace injury, will pose the greatest risks for small to medium size businesses over the next 12 months.
AIG Singapore analysed claims data and found that the top three risks facing SMEs in 2016 are workplace injuries (56%), fire or water damage to property (20%) and legal liability (20%).
Head of SME Packages at AIG Singapore, Krishna Moorthi Sri Ramalu, said that while SMEs have been focused on external issues, internal risks pose the biggest threat.
“With growing awareness of external threats such as cyber attacks and data theft, much attention has been placed on how these external risks can cripple SMEs. While these threats are indeed significant and on the rise, SME owners must not forget their assets are exposed to internal risks every day,” Moorthi Sri Ramalu said.
“AIG Singapore forecasts that the greatest risks SMEs will face in the next 12 months are due to internal factors such as injury to employees and damage to property and equipment.”
“Workplace injury claims accounted for over half of AIG Singapore’s claims last year. It is a key risk factor for SMEs that cannot be ignored, particularly with a 10 per cent rise in fatal workplace injuries from 2014 to 2015.”
Workplace injury claims rose by 17% in 2015, when compared with 2014, as the amount paid for workplace compensation claims is forecast to increase by 20% to 30% this year.
The manufacturing industry saw work-related injuries account for 90% of its top claims over the last three years, according to AIG Singapore data, as the top three industries that submitted SME-related claims are food and beverage, retail and manufacturing.
In 2015, an average claim made by an SME was around S$6, 000 with the highest claim topping out at S$214,000 made by a medical clinic when its water pipe burst and damaged both the clinic and neighbouring businesses.
Moorthi Sri Ramalu said that SME owners need to invest in risk management as a tougher economic outlook could impact prices as risks continue to rise.
“SME owners often do not invest in risk management and contingency planning as they are preoccupied with the day-to-day running of their companies. However, it is precisely because of their smaller scale that SMEs can ill-afford hefty losses caused by business interruptions or closures, loss of income, supply chain delays or damage to neighbouring properties,” Moorthi Sri Ramalu said.
“In fact, this year’s tough economic climate exacerbates the financial impact on SMEs. In the event of incidents such as fires, property damage, or floods, they may be hit with high costs and forced to stop operating for a period of time.
“SMEs need to look at how they can protect their business operations and get these operations back on track swiftly if incidents occur.”
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