SMEs urged to insure against flood damage

THERE is a need for small and medium enterprises (SMEs) to take up flood coverage protection because of increasing flood risks, says an official with a re-insurer.

The country has seen a series of flash floods hit several states in the past twelve months with the latest affecting Kelantan, Johor and Pahang. These flash floods not only damage properties but also cause severe losses to businesses.

According to a news report, the floods in Johor last December had caused damages worth RM350 million to infrastructure while the private sector reported estimated economic losses at RM2.4 billion.

Kishna Fitra Nordin, who works in a local re-insurer and has experience with large specialised risks, said the magnitude and frequency of floods are likely to grow as a result of climatic change, higher intensity of rainfall as well as rising sea levels.

The impact from floods may increase as more people live in areas at risk of flooding and more economic assets such as businesses are located in these areas.

She said that although floods cannot be prevented, businesses can be protected effectively by transferring the risk to the insurer.

"Insurance is an intangible investment as you can only realise the benefits once a loss is experienced. Many times, business owners don't make provisions for insurance because they view it as a liability," she said in an interview.

The main benefit of such protection is the replacement of damaged properties and goods will be easier and quicker.

General Insurance Association of Malaysia (Piam) executive director Lim Chia Fook said those whose economic survival depends upon protection and can afford it should be encouraged to pay for the cost of their own protection.