Two out of every three cars you passed in traffic this morning were uninsured. More than four out of every five working South Africans you’ll encounter today have no medical aid or critical illness cover. And collectively, the country’s 16.1 million formally employed earners have enough life insurance cover to meet just 39% of their families’ needs. Those numbers – gleaned from various reports from the Automobile Association and the Association for Savings and Investment South Africa (Asisa) – reflect the country’s underinsurance crisis. But what they don’t tell you is how deep that crisis is for SA’s small businesses.

According to the FinScope MSME Survey South Africa 2024, only 18% of SMEs have any form of business insurance. That leaves 80% of small businesses exposed to risks that could wipe out years of progress or put them out of business for good.

‘South Africa’s small and medium-sized businesses are running multimillion-rand risk portfolios on the thinnest of safety nets,’ says Vanessa Thurlwell, a consultant and lecturer in risk management at Stellenbosch Business School Executive Development. ‘For many, one uninsured incident can be crippling. In a country where crime, collapsing infrastructure and climate shocks are rising together, operating without proper business insurance has become a high-stakes bet against reality, and too many SMEs are gambling with everything on the table.’

The odds are stacked against them. ‘The risk is far more pronounced for small businesses than it is for big businesses,’ according to Phoko Masha, head of technical and reinsurance at Absa South Africa. ‘Big businesses have cash reserves and contingencies. The same cannot be said about small businesses that are operating on a tight budget.’

For a JSE-listed corporate, a stolen bakkie or a broken machine is an inconvenience. For a small business, it’s a potential disaster that could spell the death of the business as a going concern.

‘The risk landscape for SMEs is not abstract,’ says Thurlwell. ‘It’s a leaking roof, a burning warehouse, a stolen fleet, a hacked email account, a staff injury. South African entrepreneurs have become worldclass at “making a plan” around load shedding and disrupted services, but there are limits to improvisation. You can rig up backup power for a few hours, but you cannot “make a plan” to replace a burnt-out factory or a cleaned-out workshop without some form of insurance. Without cover, repairing a damaged roof or replacing stolen machinery is paid for from working capital. And you certainly cannot self-fund weeks of lost income while the business is closed, staff are idle and customers quietly move to competitors.’

But while business insurance – or any insurance, for that matter – remains a grudge purchase, it’s an essential investment in business continuity.

‘There’s a misconception that SMEs don’t need insurance,’ says Charmaine Mthombeni, spokesperson for King Price. ‘I think some business owners are under the impression that insurers don’t pay out, or maybe they’ve heard stories about other people’s bad experiences… But it all boils down to having the right cover.’

Mthombeni highlights one of the ironies of the insurance landscape: despite being massively underinsured in general, many South Africans are overinsured in specific areas. An example that’s been flagged by National Treasury and the Financial Sector Conduct Authority (FSCA) is funeral policies, where (otherwise underinsured) individuals end up having multiple funeral policies whose total payout far exceeds the actual costs of a single funeral.

Some SMEs fall into a similar trap, where their insurance cover is misaligned with their risks. ‘You don’t have to get everything,’ says Mthombeni. ‘If your business doesn’t transport goods, for example, then you don’t need to take out insurance for goods in transit. Sit with your broker, sit with your insurer, and make sure that the insurance product that you are getting is tailor-made for your specific business.’

Masha agrees. ‘Businesses change, and their insurance needs change,’ he says. ‘The risk landscape is also evolving, to the extent that small businesses are now exposed to things like climate change and cyber threats, which they weren’t in the past. Today, as insurers, we consider each business client on its own merits. We profile the business, identify potential areas of exposure, create a risk map, and work with the client to ensure we’re providing appropriate insurance cover.’

That risk map will typically highlight the SMEs’ biggest assets as being their biggest risks – and for small businesses, many of which run on the sheer willpower of their owner or a small team, their biggest hidden asset is their people.

Every business has at least one ‘indispensable’ employee, says Pedri Reyneke, CEO of Multilink Financial Services. It could be the founder, a top sales lead or the only technician who knows the machinery inside out. Losing that person to illness, disability or death can derail the entire operation. ‘Too often, SMEs only realise the danger when it’s too late,’ says Reyneke. ‘Losing a key person without a contingency plan is like losing your captain and hoping the rest of the team can coach themselves.’

Anthony Miller, CEO of Simply Financial Services, agrees. He points out that a significant portion of formally employed South Africans have no employer-provided financial protection if illness or injury takes them out of work, no income replacement, no lump sum for a critical diagnosis and no life cover for their family. This is where underinsurance at a personal level overlaps with underinsurance at a business level, to devastating effect.

‘It’s the kind of moment that exposes whether employers have thought about the risk sitting inside their payroll,’ says Miller. ‘The question every employer should be asking is: if one of my people can’t work tomorrow, what happens to them, and what happens to my business? That’s a risk assessment conversation, not just a benefits conversation.’

Another common overlap – and critical business risk – happens when small business owners blur the banking lines between themselves and their business. ‘Many entrepreneurs rely on their own savings or personal insurance policies to protect their businesses,’ says Reyneke. ‘But personal cover is rarely enough. A personal life policy won’t cover staff salaries, office rent or supplier payments if the owner can’t work. Likewise, dipping into personal savings during a crisis can put household finances at risk. Tailored business strategies, including insurance, credit facilities and reinvestment in critical assets, create a healthier safety net.’

The SME sector is a hustle. The risks are big, the rewards often aren’t, and – as Thurlwell says – the overriding business strategy is to ‘make a plan’. But insurance is one area in which duct tape, dreams and a can-do spirit simply aren’t enough.

‘South African SMEs pride themselves on hustle and grit, and rightly so,’ says Thurlwell. ‘But in 2026, grit alone is no longer a strategy. The real question for small business owners is no longer whether they can afford insurance… It’s whether they can afford to face this risk landscape without it.’

By Mark van Dijk
Image: iStock