Risk of Re­gret: Busi­ness Li­a­bil­ity & Pro­fes­sional In­dem­nity Re­port 2017

THE RE­PORT IS BASED ON IN­TER­VIEWS WITH SOME 300 SMES AND LARGE COR­PO­RA­TIONS IN MALAYSIA THAT TOOK PLACE IN APRIL AND MAY 2017. IT LOOKS AT BOTH CUR­RENT AND FU­TURE BUSI­NESS CHAL­LENGES AND OP­POR­TU­NI­TIES, AS WELL AS HOW WELL-PRE­PARED COM­PA­NIES ARE TO DEAL WI

Insurance - - CONTENTS - Text QBE In­surance Malaysia

More than a quar­ter of com­pa­nies said they have ex­pe­ri­enced le­gal and reg­u­la­tory com­pli­ance is­sues (28%) and loss of in­come due to busi­ness in­ter­rup­tion (27%) over the past 12 months. An­other 24% re­ported staff in­juries, 22% suf­fered dam­aged or lost in­ven­tory, and 21% ex­pe­ri­enced loss of in­come due to equip­ment break­down. Many Malaysian com­pa­nies do not take out busi­ness li­a­bil­ity in­surance un­til af­ter some­thing hap­pens – putting their busi­ness and cus­tomers at risk, while only 64% of com­pa­nies know what busi­ness li­a­bil­ity in­surance is, out of which only half (53%) in­tend to pur­chase. “With more com­pa­nies ex­pe­ri­enc­ing le­gal and reg­u­la­tory com­pli­ance is­sues in the past year, busi­ness li­a­bil­ity in­surance is be­com­ing in­creas­ingly im­por­tant for busi­nesses,” said Leo Zano­lini, CEO, QBE In­surance Malaysia. Less than half (45%) of com­pa­nies own this type of in­surance. Aware­ness is also low for pub­lic and prod­uct li­a­bil­ity in­surance at 31% and pro­fes­sional in­dem­nity in­surance at 27%. The busi­ness slow­down is ex­pected to con­tinue over the next 12 months ac­cord­ing to 37% of re­spon­dents, and 28% ex­pect tech­nol­ogy ad­vance­ment and in­no­va­tion, es­pe­cially large com­pa­nies at 32% com­pared to 24% of SMEs.

CUR­RENT BUSI­NESS CHAL­LENGES

Half of SMEs are ex­pe­ri­enc­ing busi­ness prof­itabil­ity chal­lenges, com­pared to large com­pa­nies who see tech­nol­ogy and sys­tems (37%) and new reg­u­la­tions and laws (31%) as greater chal­lenges. Re­gard­less of com­pany size, busi­nesses are gen­er­ally fac­ing sim­i­lar chal­lenges and have ex­pe­ri­enced sim­i­lar busi­ness risks in the past 12 months. Large com­pa­nies more likely have ex­pe­ri­enced le­gal reg­u­la­tory com­pli­ance is­sues, loss of in­come due to busi­ness in­ter­rup­tion and staff in­juries. Dam­aged busi­ness prop­erty seems to be more of a challenge too.

BUSI­NESS PRO­TEC­TION

Many com­pa­nies take out in­surance only af­ter ex­pe­ri­enc­ing an in­ci­dent, or not at all – putting their busi­ness and cus­tomers at risk. QBE’s re­search re­veals the trend of com­pa­nies re­act­ing af­ter an in­ci­dent is com­mon across a range of busi­ness risks. Of the busi­nesses that had pub­lic or third-party li­a­bil­ity is­sues due to ac­ci­dents or busi­ness neg­li­gence, 38% took out busi­ness li­a­bil­ity in­surance only af­ter the in­ci­dent oc­curred, and 6% took no ac­tion at all. Com­pa­nies with other prob­lems had a sim­i­lar post-event re­ac­tion – busi­ness li­a­bil­ity in­surance was pur­chased after­wards by 24% of com­pa­nies who ex­pe­ri­enced cus­tomer or pay­ment in­ter­net fraud; 22% who had sen­si­tive data stolen over the in­ter­net; 22% whose staff were in­jured at work, and 20% of com­pa­nies who ex­pe­ri­enced pub­lic or third party li­a­bil­ity prod­uct and ser­vice is­sues. “While many busi­nesses are re­act­ing af­ter an in­ci­dent, we were also sur­prised by the num­ber of busi­nesses who said they took no pro­tec­tion ac­tion what­so­ever af­ter an in­ci­dent,” said Zano­lini. One in five (19%) Malaysian com­pa­nies who ex­pe­ri­enced pub­lic or third party li­a­bil­ity is­sues due to prod­ucts or ser­vices took no ac­tion at all. An­other 18% took no ac­tion af­ter ex­pe­ri­enc­ing fraud­u­lent pay­ments over the in­ter­net.

Aware­ness of gen­eral busi­ness in­surance is high, but aware­ness of busi­ness li­a­bil­ity and pro­fes­sional in­dem­nity in­surance is low. The re­port also re­vealed a gap be­tween aware­ness and us­age of gen­eral busi­ness in­surance and busi­ness li­a­bil­ity in­surance. Nearly all Malaysian re­spon­dents (96%) have some form of busi­ness in­surance, in­clud­ing gen­eral ac­ci­dent and em­ploy­ees com­pen­sa­tion cover. How­ever, aware­ness and take up of busi­ness li­a­bil­ity in­surance pro­tec­tion is far lower. Less than half (45%) of Malaysian SMEs and large com­pa­nies cur­rently have busi­ness li­a­bil­ity cover, and 64% of busi­nesses are aware of it. The re­search also found that both aware­ness and us­age for pro­fes­sional in­dem­nity in­surance fur­ther de­creases at 27% aware­ness and only 19% us­age. Pub­lic and prod­uct li­a­bil­ity in­surance stands at 31% and 21% re­spec­tively, while the fig­ures for di­rec­tor’s and of­fi­cer’s li­a­bil­ity in­surance fall to 17% aware­ness and just 8% us­age. Bud­gets, scale and other pri­or­i­ties are the key rea­sons Malaysian busi­nesses over­look pro­tec­tion in­clud­ing in­surance. When asked why com­pa­nies did not own busi­ness li­a­bil­ity in­surance, nearly half of the re­spon­dents (45%) said their busi­nesses were too small and the costs were big­ger than the risks. An­other 41% of com­pa­nies cited bud­get is­sues, and a fur­ther 29% said they had other busi­ness pri­or­i­ties. One in five (20%) said in­surance poli­cies were too com­plex, and 14% re­sponded that they did not have time to re­search dif­fer­ent li­a­bil­ity solutions.

HEAD­WINDS CON­TINUE

Look­ing ahead over the next 12 months, Malaysian busi­nesses ex­pect chal­leng­ing busi­ness con­di­tions to con­tinue, with 37% of busi­nesses fore­cast­ing a slow­down in busi­ness as well as higher in­put costs and lower prof­itabil­ity (36%). More SMEs iden­ti­fied slow­ing busi­ness con­di­tions as an is­sue than large cor­po­rates, at 43% and 29% re­spec­tively. A quar­ter of com­pa­nies (24%) also ex­pect to see more in­tense busi­ness com­pe­ti­tion. More pos­i­tively, 28% of Malaysian busi­nesses ex­pect to see in­creased ad­vance­ment in­vest­ment in tech­nol­ogy, which 79% fore­cast will bring pos­i­tive change to their in­dus­try. The out­look was also re­flected in the big­gest cur­rent chal­lenges for busi­nesses, which re­spon­dents iden­ti­fied as busi­ness prof­itabil­ity (46%); cost re­duc­tion (40%); staff re­ten­tion (36%); cus­tomer re­ten­tion plus main­tain­ing tech­nol­ogy and sys­tems (both at 35%); and tal­ent ac­qui­si­tion (30%).

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