Under cover: With insurance, natural calamities like the Mumbai downpour will be less painful

As Srinivas Pawar watched Mumbai bear the brunt of a savage downpour (the city received the highest-ever rainfall recorded in a single day, 944 cm, on July 26), he couldn't help breaking into a wry smile. The owner of two Hyundai dealerships in Mumbai, he had insured his business just six months ago (premium: Rs 10 lakh; sum assured: Rs 10 crore). As the flood waters rose, Pawar's thoughts turned to the pesky insurance salesman from New India Assurance Company, a PSU general insurance company, who had (with an eye on a fat commission, no doubt) pestered him no end to buy into his sales pitch. "This man kept chasing me for three to four years, and six months ago, I gave him the money unhappily," he muses.

Pawar has no reason to feel unhappy now. The losses he incurred (Rs 4 crore from flooding at his workshop and stockyard at Navi Mumbai) can now be recovered, thanks to his insurance policy. Like Pawar, many of Mumbai's other SMEs (small and medium enterprises) appear to have had themselves covered for the disaster. "More than half the 13,000 claims are from SMEs," says Girija Kumar, Assistant General Manager, New India Assurance.

SME's Insurance Imperative

Most SMEs, however, being generally single promoter-owned, funded and controlled, tend to be on a tight leash in terms of spend, and end up being under-insured. That can be dangerous because in the event of a natural calamity, SMEs are the least equipped to cover lost ground, unlike large companies who have the resources to absorb a few heavy blows. This is not to say that only SMEs are under-insured-"The amount of insurance taken in (the whole of) India is equal to a city like Hong Kong," says Alok Agarwal, Head (Corporate Solutions Group), ICICI Lombard, a private insurance company-but the adverse effects of under-insurance impacts SMEs most. As Pawar says, "I would have (had) to sell some property to recoup my losses had I not taken insurance."

Srinivas Pawar Chairman & MD/ Sharayu Hyundai/ Mumbai Locations: Jogeshwari and New Mumbai Employees: 200 Annual turnover: Rs 200 crore Insured against: Fire, accidents and floods Losses: Rs 4 crore as a result of flooding	Arvind Kapur Managing Director/Rico Auto Industries/ Gurgaon Locations: Gurgaon, Manesar and Dharuhera Employees: 3,000 Annual turnover: Rs 700 crore Insured against: Fire, machine breakdowns, riots, theft, malicious damage and loss during marine transportation

Why are SMEs under-insured? High premiums are cited as one reason. But Agarwal is quick to point out that premiums are just a fraction of the sum assured (1-4 per cent per Rs 1,000). "Don't be penny wise and pound foolish," he says. There's also the perception that insurance companies delay payments, but when your livelihood is at stake, delayed payment is better than no payment. Insurance companies, meanwhile, have come out with policies that secure businesses against virtually any setback. For instance, there are policies that cover damages from storms, flood inundations as well as modern-day risks such as riots, strikes and terrorist attacks.

Earthquakes, floods and the like, you see, aren't the only threats you're up against. "Insurance is critical to the safety and security of companies especially after the labour union unrest (at the Honda Motorcycle & Scooter India factory) in Gurgaon," says Arvind Kapur, Managing Director, Rico Auto Industries, an auto component manufacturer at Gurgaon, who bought a Rs 350-crore Industrial All Risk insurance policy in June 2005, that covers every perceived threat (natural or otherwise) except war. Kapur, despite being a large manufacturer, did the smart thing. You should, too. For what transpired in Mumbai, or Gurgaon, could happen to you, any time.