by HARIZAH KAMEL/ pic by HUSSEIN SHAHARUDDIN
ONLY 15% of SMEs have purchased flood cover, indicating that more than 80% do not have coverage against flood risk, based on a study by AIG Malaysia Insurance Bhd.
Its CEO Antony Lee (picture) said SMEs need to prepare the necessary plan to brace the bad weather, such as flood situation.
“It is important that SMEs take the right steps to protect their businesses in the event of flooding, which has become more prevalent in the country over the years.
“At AIG Malaysia, we acknowledge the contributions that SMEs have provided to our economy and we want to assist them in the best way we can — by providing protection that they need to face such untoward incidents,” he said in a statement on Saturday.
Although measures are being taken to mitigate the effects of natural disasters, AIG Malaysia said SME owners must have other initiatives such as the right insurance cover to manage their businesses and have contingencies set in place.
AIG Malaysia’s SME insurance plan offers 13 types of protection under one policy, which allows SMEs to pick and choose what fits their business.
AIG SME provides flood cover via its two main products, namely “SME Standard” and “SME Property All Risks” upon request with additional premium.
Concerns were raised when the Malaysian Meteorological Department issued a warning that the northeast monsoon season — from early November to end of March — could get worse by 20% to 40% in the eastern coastal states of the peninsula, followed by rain in East Malaysia.
Major floods have occurred in the country over the past few decades with catastrophic effect, including extensive damages to property, road systems, and agricultural land and crops.
Floods have also become more common in main cities such as Kuala Lumpur, Penang and Kuching where rapid urbanisation is taking place.
According to a study published by the Department of Irrigation and Drainage, some of the main causes of flooding in the country include increased runoff rates due to urbanisation, inadequate drainage systems, siltation in waterway channels and localised continuous heavy rainfall.
In 2014, the Ministry of International Trade and Industry reported that the Kelantan floods affected over 13,000 SMEs — equivalent to 37.7% of all SMEs in the state.
The situation subsequently took a turn for the worse during the 2017 Kelantan floods that cost the state more than RM30 million in damages.
In the same year, floods in Penang caused close to 2,000 victims to be evacuated.
AIG SME was able to assist those affected with 34 claims at an estimated reserve of RM2 million, responding with interim payments to some of the most affected policyholders within four days after notification.
This flooding incident also increased AIG SME Flood claim by more than 100% from RM1.29 million in 2016 to RM2.5million in 2017.
As of this year, the flash floods in Tawau that occurred in May deluged many areas in the third-largest town in Sabah, affecting its productivity and the locals’ daily earnings.
SMEs that are severely underinsured to natural disasters, primarily floods, will have to act fast as the monsoon season approaches.