Small and medium enterprises (SMEs) are integral to the growth of the Malaysian economy. As mentioned in an SME Annual Report released by SME Corp Malaysia, SMEs contributed a whopping RM435.1 billion to the GDP in 2017, with a higher GDP growth of 7.2% against 5.2% in 2016. This resulted in the GDP contribution of SMEs increasing to 37.1% and SME employment growing to 3.4%, thereby improving the SME contribution to overall employment to 66%. However, the uptake on insurance in SMEs when it comes to natural disasters such as flooding is still a concern.
According to AIG Malaysia Insurance Bhd data, only 15% of insured policyholders have purchased flood cover. This means that more than 80% of SMEs have no coverage against flood peril, denoting the lack of comprehension on the urgency of the risk and consequences to the overall running of their business.
In recent years, occurrences of floods have become more common in cities such as Kuala Lumpur, Penang and Kuching where rapid urbanisation is taking place. Major floods have occurred in the country over the past few decades with catastrophic effect, including extensive damage to property, road systems, and agricultural land and crops. A study published by the Department of Irrigation and Drainage suggested that some of the main causes of flooding in the country include increased runoff rates due to urbanisation, inadequate drainage systems, siltation in waterway channels and localised continuous heavy rainfall.
In 2014, the Kelantan floods affected over 13,000 SMEs or 38% of SMEs in the state, as reported by the Ministry of International Trade and Industry. The subsequent floods in Kelantan in 2017 cost the state more than RM30 million in damages. In the same year, the floods in Penang saw some 2,000 victims evacuated.
On its part, AIG said its SME policy was able to assist those affected with 34 claims at an estimated reserve of RM2 million, responding with interim payments to some of the most affected policyholders within four days after notification. The flooding incident also increased AIG’s SME flood claims by more than 100% from RM1.29 million in 2016 to RM2.5 million in 2017.
AIG Malaysia CEO Antony Lee (picture) said SMEs need to be more prepared when bad weather comes their way. “Natural disasters are unpredictable, but are also a part of our landscape as Malaysia has a tropical climate. It is important that SMEs take the right steps to protect their businesses in the event of flooding, which has become more prevalent in the country over the years. “At AIG, we acknowledge the contributions that SMEs have provided to our economy and we want to assist them in the best way we can — by providing the protection that they need to face such untoward incidents,” he said.
AIG’s SME insurance plan offers 13 types of protection under one policy, which allows SMEs to pick and choose what fits their business best according to their own needs.
It provides flood cover via its two main products, SME Standard and SME Property All Risks, upon request with an additional premium.
Source: The Malaysian Reserve
