New Insurance Coverages for the Small Businessmen - Assignment Example

Risk and Insurance Name Institution Part 1 Critical Analysis: New Insurance Coverages for the small businessmen The article "New Insurance Coverages for the small businessmen" by James Nolan is both insightful and informative as it shows how the risk management and insurance schemes for small and medium-sized enterprises have evolved radically in ways that favor the enterprises, as more insurance companies are giving the better packages at less cost. The insurance companies have cut their prices in what seems like a vicious price war to attract more small businesses. Indeed, these form the main ideas of the article. Clearly, the author's main argument is that When the small businesses and practicing professionals buy insurance through an association, they can overcome the rising cost, benefit from price stability through supplemented buying and ultimately benefit from alternatives of risk-financing that may not be accessible to them when they buy the insurance independently. Nolan also argues that as part of their risk management efforts, small businesses should carry out product safety education programs and apply implementing sound business practices to preclude the possibility of suits. The article, therefore, has a multi-stakeholder perspective. It was intended to a varied audience, such as insurance firms, underwriters, marketing, and planning practicing professionals, small businesses, researchers, risk manager, lawyers, insurance buyers, project managers, and students. By using direct quotes from some industry players with knowledge in the field of insurance, Nolan’s article manages to be highly persuasive. In fact, his method of writing suits some stakeholders such as insurance firms and buyers to change their strategies for selling and buying insurance respectively. However, for researchers and students, this article is not very helpful, as it only provides a review of the changing trends. In fact, a deeper scrutiny into the article word for word shows that the author’ main purpose was just to offer an opinion on the how insurance companies are competing to get the growing number of small businesses into their houses by offering more insurance packages at reduced costs. Nolan’s idea, therefore, was to survey and summarize this topic, rather than offer an argument or parallel arguments on the topic by building on previous empirical research or refuting other researchers or authors’ arguments. This, on the other hand, also forms the main limitation of his article. While Nolan has provided an exciting point of view on the changing trends in insurance underwriting to favor small businesses, his article is mostly opinionated or biased. Rather than rely on empirical researchers or probe some counter arguments that would have to enable him to validate his argument objectively, he relied on perspectives of different insurance sellers and buyers who strictly shared the same view with him. For instance, to show the growth of association insurance policy, Nolan quotes the managing director of Marsh and McLennan called Guy R. Miliaccio who argues that buying insurance through package or an association can help small businesses cut costs. In my view, for instance, Nolan should have pursued a dissenting argument also to show that the lowest price for insurance is not always the best alternative, as the package may not cover certain business interests comprehensively. Therefore, the scope of his article is narrow as it is filled with selective opinions to support his argument. Building on this assessment, the authenticity of Nolan’s article should be held in question. One clear justification for this is the lack of literature review of empirical research. This undermines the level of the article’s objectivity, as it is not anchored in observed or studied phenomena from past studies. In fact, as Belt et al. (2011) stated, reviewing current and past research make add to the authenticity of a research article as it increases the level of its comprehensiveness and objectivity. This also limited an understanding of the empirical justification and impacts of the changing risk management and insurance schemes for small and medium-sized enterprises. Clearly, reviewing current and past research literature, rather than just relying on the opinions of selected industry players, would have made Nolan’s article authentic in terms of being objective and comprehensive. This also shows that Nolan did not use of theories to justify his argument. Clearly, lack of theoretical review does present an underlying weakness in the article. Alternatively, Nolan should have provided a methodology section to illustrate how he recruited those he interviewed to show that the participant selection was biased and suited to fit his argument. This leads us to the next point. Nolan did not describe the research methodology. This makes assessing the scientific basis of his research and justification of his findings difficult. Indeed, as not to attempt is made to describe the different aspects of the research methods, this shows the low level of empiricism of his work. However, he logically presented his research discussion, which facilitates easy identification of his reasoning or opinions. The problem is since he did not provide hypothesis or review of the literature, it becomes tricky to determine whether his reasoning is consistent with the original idea. This also makes it difficult to determine whether the study was effectively conducted. The author did not attempt to provide sections for results and discussions. The presentation of results and discussion is weak, as Nolan should have used more graphical or visual presentation techniques, such as tables, figures, and graphs instead of just one drawing of three professionals finding shelter in beneath an umbrella. In conclusion, despite utter disregard for academic research criteria to validate his arguments, Nolan did provide convincing arguments. He showed that when the small businesses and practicing professionals buy insurance through an association, they get to reduce their overheads, benefit from price stability through supplemented buying, and ultimately benefit from many risk-financing options. He also showed that small businesses should carry out product safety education programs to prevent the possible suits for product liability. Part 2 How SMEs in the United Arab Emirates (UAE) can manage their risk and have a special interest from insurer In 2014, a study by the Zurich Insurance Group revealed that SMEs in the United Arab Emirates tend to overlook risks like fire and supply chain disruption, yet are more interested in risks that may affect their profitability, such as high competition, and fragile consumer demand. Ironically, a majority of the SMEs considered fire and supply chain disruption as the most prevalent risks facing their business. Additional prevalent risks include employee and customer health and safety risk and cyber crime. Clearly, therefore, SMEs are key risk-takers that should protect their interests. By building on Nolan’s (1983) assumptions, SME’s should look out for the most cost-effective yet comprehensive association package available on the market. The SME sector is particularly critical for continued market growth in the UAE. The SMEs in the UAE should protect their special interests through insurance to enable them to attain desirable growth cycle. By sustaining the risk management process, the SME sector would experience continued growth. At the same time, with the growth of the market also grows the need for insurance, as an SME would be exposed to more risks. Fundamentally, SMEs should look out for sustainable insurance packages. They will need to have knowledge of how a risk correlates with their current and future objectives. They have to select the right insurance by going for a package would not leave them overinsured or underinsured. When this happens, their business would be sustainable, since the risks would be covered. The SMEs should take advantage of the trend of underwriters who cut their prices in the price war, as this would allow them to cut costs because of low premiums. At the outset, the price of insurance would be the deciding factor, since an SME is by and large and typically in its infancy. The SME in UAE should acknowledge their liability exposure and transfer their risks to self-insurance programs. According to Nolan (1983), self-insurance programs would allow SMEs to sidestep an underwriter. SMEs should also consider taking association insurance policy. Based on Nolan's (1983) perspective, association insurance policy is particularly suitable for SMEs. He argues that "association insurance." Nolan showed that while health insurance is a fundamental social insurance challenge, the “rising rates and benefits” for employees' compensation as well as pricing problems with the product and professional liability are increasing the overhead costs of the SMEs. In such scenario, Nolan advises that SMEs should buy insurance through an association instance to reduce their overheads, find price stability, and get comprehensive packages at low costs. In risk management, small businesses are not able to spread the cost of their product liability premiums over the long-term. This also applies to the SMEs in UAE. Nolan advises that product liability should be much more than a business covering its exposure. Nolan advises that in such situations, the small businesses should carry out product safety education programs to preclude the likelihood of suits. Therefore, SMEs in the UAE may reduce product liability suits by conducting public and professional educations, limiting expectations, and lastly, implementing sound business practices, including product liability preventive system. Hence, in spite of whether an SME buys insurance or not, it should have sound risk management strategies in place, as proper housekeeping can prevent product liability (Nezeritis, 2016). In conclusion, SMEs in the UAE should buy insurance through an association, as this will enable them to reduce the rising overheads yet also benefit from price stability through supplemented buying, and ultimately benefit from multiple risk-financing options. When it comes to risk management, the SME should also carry out product safety education programs to prevent likely suits for product liability. References Belt, P., Mottonen, M., Harkonen, J. (2011). Tips for Writing Scientific Journal Articles, Industrial Engineering and Management Working Papers 2011 /5 Nezeritis, A. (2016). SME claims & risk management in the uae. Retrieved from http://www.theintelligentsme.com/2016/06/sme-claims-risk-management-uae/ Nolan, J. (1983). New insurance coverages for the small businessman. American Bar Association Journal, 69(4), 478-481 Zurich Insurance Group. (2014). Majority of UAE SMEs overlook key risks to business. 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