Don’t despair about health insurance premiums for your staff, says Saahil Mehta, co-founder and managing director of ResNet World – SMEs can benefit as a collective from corporate rates and cover.
As entrepreneurs, we are faced with several challenges in the early stages which include, but are not limited to, managing cash flow, keeping overheads low, increasing revenues, getting the right legal support and choosing an auditor. One of the biggest challenges I found in Dubai, however, was getting the right people.
Based on the local labor laws, potential candidates are sacrificing a lot of security to work for start-ups and, in some cases, bigger SMEs too. Being a start-up, however, we are able to offer equity (or ‘sweat’ equity), more responsibility and the excitement of being part of a potentially big and successful company.
One of the areas that we tend to neglect, generally due to lack of knowledge, is health insurance. Large corporates are able to get corporate rates – which means they are not only able to get health insurance at a better price, but they also offer better coverage.
Too small for corporate health plans
I recently hired an individual whose wife was expecting their first baby within a few weeks. With the solution I found, my company of four employees and families – including my newest hire and his pregnant wife and child – were able to receive corporate-level benefits while I paid corporate-level rates – as an SME. How did we achieve that, you may ask?
Our company policy is that we provide insurance to all our team members AND their spouse and kids, if any. As we started to hire more people, I was finding this to be a real burden on our cash flow – plus I started to get a lot of complaints about the lack of coverage (hospitals and clinics included in the program, for instance) as well as unfavorable comparisons to other plans.
I found this a little odd as, according to my broker, I had a great plan… and I was paying an average of AED 7,000 – 8,000 per annum per employee. But when I flagged the complaints up to my broker, he explained that our hands were tied as the policies were, by necessity, individual per employee rather than one corporate plan, as a corporate plan needed a minimum of 20 employees. At most, we were getting a small discount for having, say, at least three employees covered with the same insurance from the same insurer.
Collective health insurance for SMEs
Surely, I asked my broker, there are plenty of small companies, low in manpower numbers, that, when combined, could benefit from a corporate plan?
With some persistent requests on my part, my broker put together a collective consisting of several companies like mine. Now, in the eyes of the insurance company, we were considered a group making up more than 20 employees – just like a corporate – and could enjoy the same the corporate benefits.
Not only did the company save 20 – 30 percent on the premiums, but we also have happier staff due to the additional benefits and coverage they get. We are now one step closer to the corporates for the kind of employee package we can offer our staff, and a happier team member certainly equals better productivity.
Business insurance you need
Apart from health insurance, you also need to consider the different types of business insurance that may be mandatory depending on the jurisdiction or free zone your company falls under – DMCC, for instance, insists on third party (public) liability insurance, and you cannot renew your license without this insurance.
In our experience, the most important insurances are:
- Third party liability (a visitor tripping within office premises, for instance, or a fire spreading to a neighboring property)
- Workmen’s compensation liability (an occupational injury to an employee during the course of their employment)
- Travel insurance for employees
- ‘Key man/ key person’ insurance (life insurance on the key person or people in a business).
Key man insurance was very important as, if any of our key staff worldwide were to suffer from a critical illness, or, in the worse case scenario, die, our company would take a big hit.
We came to an agreement whereby we took out ‘term’ life insurance for all directors (i.e. fixed for a predefined term of, say, two or 20 years), which was paid by the company. In the event of an unfortunate incident, the money we insured for would be evenly split between the company (50 percent) and an individual nominated by the director (50 percent).
Using an insurance broker
But it was a challenge to get the key man insurance; there’s a lot of insurance fraud about, so I had to provide a lot of additional financial information to get the insurer to sign off on US $2m key man insurance for the key staff at a start-up that was not yet profitable.
I certainly took insurance more lightly than I should have at the beginning, but our company is now in a much place in terms of protection.
I was very happy to go through a broker rather than working with one insurance company directly, as he was able to shop across multiple options and choose the best for my company and me.
Saahil Mehta is the co-founder and managing director of ResNet World, a company focused on maximizing revenue and profitability for hotels through increased online presence and e-distribution. ResNet World partners with over 350 hotels with offices located in Dubai, Berlin and Mumbai.