Decline in commercial insurance offtake to MSME sector, say insurance experts

COVID-19 disrupted businesses across the country, particularly for Micro Small and Medium Enterprises (MSMBs) given their typically thin cash reserves. The impact of the pandemic on MSME sector also gets reflected in the decline in commercial insurance cover bought by the sector to protect their businesses. 

“What we saw is that the large industrial manufacturing set-ups continue to buy commercial insurance. However, we saw a substantial drop in the case of smaller traders, merchants and manufacturers as they face a substantial cash crunch. This is because insurance is not really a top item in the order of priority when they're looking to spend the money. So, I think there is still some pressure over there. And I think the current inflationary trends are also not helping that segment of the commercial business. However, the commercial segment at the upper end is continuing to grow,” says Roopam Asthana, CEO and the Whole Time Director of Liberty General Insurance.

Kapil Mehta, co-founder at SecureNow, which is a tech-enabled insurance broker, agrees, “We have definitely seen a decline in commercial insurance offtake to MSMEs due to their cash crunch. We've addressed this in several ways, one of which is to arrange for payment of premium in instalments rather than in one go. This reduces the MSMEs payment pressures.”

MSMEs play an important role in the manufacturing sector of the country, as they comprise 36 per cent of all of India's manufacturing output. According to data from the erstwhile Udyog Aadhaar and Udyam, 9,667 MSMEs closed since 2019.

How much has the business declined from the MSMEs sector? 

“It's very difficult to do that because unfortunately, that data is not very easily available in the public domain. So, we don't know how much of the overall commercial piece is really from MSME. But when we look at from an anecdotal point of view, and from discussions within the industry, my estimate is that we would have seen an MSME, or the small commercial business during the pandemic period dropped by a 20 per cent.”

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