The Insurance Illusion: Why South Africa’s SMEs need more than policies

Posted on 8 Jul, 25 by BrightRock

In South Africa, and across much of the continent, business insurance is undervalued. According to a 2023 SME South Africa guide, most small and medium enterprises (SMEs) see insurance as a grudge purchase, an expense to avoid unless absolutely necessary. For too many entrepreneurs, business insurance, succession planning, and keyperson insurance only enter the conversation after disaster has already struck.

This points to a more profound issue: insurance is often perceived as a reactive tool for worst-case scenarios rather than a proactive enabler of business continuity and growth.

The Risk Illiteracy Gap

For SME owners, there’s a disconnect between understanding risk and preparing for it. Insurance providers have long leaned on scare tactics to drive uptake, instead of shifting the narrative to one of resilience, opportunity, and growth enablement.

The low penetration of business insurance products is not simply a pricing issue. It’s a value proposition issue. Why would a growing business invest in something it perceives as neither urgent nor beneficial to scale?

This is where the insurance sector must rethink its messaging and engagement. The goal should not be to sell a policy. The goal should be to sell scalability and futureproofing.

Business Insurance as a Catalyst for Access to Capital

There’s an angle that deserves more attention: insurance as a prerequisite for funding. Many SMEs fail to qualify for loans or equity investments because they lack basic risk-mitigation strategies. Funders are increasingly looking for signs that a business is protected, not only because it reduces their exposure, but because it reflects a level of maturity in the entrepreneur’s thinking.

Business insurance, especially keyperson cover, and succession planning signal a business’s long-term viability. Without a clear plan in place, lenders and investors may deem the business too risky.

If insurers repositioned their products as enablers of financial credibility, this could create a virtuous cycle, SMEs insure their businesses to access funding, which in turn fuels growth, and increases the need for broader risk protection.

Reframing for Relevance

To reset the relevance of business insurance, we need new language. Talk about business continuity, not just loss. Talk about protecting employees, not just property.

And importantly, products must match this reframing. That means policies that match cash flows, on-demand coverage, and digital onboarding processes that take minutes, not days.

Insurance ensures building resilience into the foundation of the economy. SMEs are the engines of growth and job creation. If they continue to face every risk alone, like the sudden loss of a founder, you compromise that engine’s long-term performance.

Insurers, advisers, government stakeholders, and SME networks must collaborate on a new model of insurance engagement: one that’s digital, educational, integrated, and above all, relevant.

The Role of Intermediaries

Advisers should be part of a broader SME ecosystem, working alongside incubators, financiers, and legal experts, to help business owners understand the importance of risk management as a core component of strategy.

For example, when helping an SME structure a partnership agreement, the discussion should include buy-and-sell agreements supported by life cover. When reviewing expansion plans, advisers should raise the need for contingent liability cover. Insurance becomes a tool for enabling each growth milestone, not a footnote.

This article is atrributed to Etienne Fourie, National Distribution Executive at BrightRock. It was originally published on FA News on 5 June 2025. You can read the article here https://www.fanews.co.za/article/views-letters-interviews-comments/18/all/1102/the-insurance-illusion-why-south-africa-s-smes-need-more-than-policies/41785