Mr. Rishab Khankal, Product Development-Universal Sompo General Insurance

The MSME sector in India is huge and crucial. More than 7.6 crore businesses are listed on Udyam/Udyam Assist. These businesses support more than 31.33 crore jobs and make up about 30% of GDP and 45% of merchandise exports . When a fire breaks out in a small factory, warehouse, or store, the financial shock spreads to suppliers, employees, and the working capital cycle. A lot of MSMEs are micro units with plenty of them are below the e-invoicing thresholds. Any digital solution which is available needs to take this into account.
Underinsurance and gaps in documentation are two problems that slows down quick and fair settlements. Under Bharat Laghu Udyam Suraksha for risks between ₹5 crore and ₹50 crore and, Bharat Sookshma Udyam Suraksha for risks below ₹5 crore, the underinsurance clause is waived by 15%. And if the risk is higher than that, then proportionate reduction would apply in claim. That's why an assessed loss of ₹20 lakh can only bring in up to only ₹12 lakh, if the insured only reported 60% of the actual value, which leaves an ₹8 lakh shortfall. This majorly happens in case of Bank hypothecated policies where in sum insured is based on loan taken by customer.
The second concerning problem is that documents are often missing or destroyed after a fire hazard, which makes completing surveys or assessments take longer time and that leads to disputes that could have been avoided. For example, invoices, stock records, fixed asset registers, and safety logs are often incomplete or destroyed. This part is even more important because of the risk context. In 2023, there were a great deal of fire accidents caused by electrical short circuits and cooking gas leaks. This shows how important it is to know how to use basic electrical and LPG controls to stay safe and avoid hazards.

We also need to be conscious that non-life insurance has thin profit margins. The industry had a claims ratio of about 82.5% and a property loss ratio of about 75–77% in 2024 , under frequent NatCat seasons. So, stricter Sum Insured and documentation rules are necessary, but this friction can be greatly reduced if MSMEs are prepared ahead of time.
Simple, low-cost steps that improve results without any red tape:
1. Make sure that the Sum Insured takes into consideration of seasonality so that it can show how risk changes from season to season. Encourage eligible MSMEs to declare for fluctuating or multi location stocks. If that's not possible, include a one-page "Average vs. Peak Stock" addendum with the proposal or renewal so that peaks are priced in and Average Clause cuts are avoided.
2. Putting together a Pre Bind Evidence Pack. A simple digital folder with a fixed asset register, recent invoices, GST or stock summaries for the last three months, a site layout, and clear photos with timestamps. General Insurance companies may help with digitization for newly formalized micro units.
3. Use consented GST/e invoice checks wherever applicable. For MSMEs with higher turnover in e-invoicing, read-only validation can triangulate values. For micro units that are below the thresholds, stock records and photos are still the main proof at risk date.
4. Imposing that a mini safety checklist is followed at bind/renewal with photo logs:
o Tests of panel load and earthing
o Servicing of extinguisher and readiness of hydrant
o Safe storage and handling of LPG (when necessary)
o Clear paths for getting out
Without liquidity and coordination delay -
Making use of on-account (temporary) payments more often for MSME fire hazards to get working capital back while the full assessment is still going on. Also, for weather-related risks (like floods), consider using parametric pilots where objective triggers are possible.
• Where suitable, combine Fire Loss of Profit/Business Interruption with clear indemnity periods to pay for restart cash flows.
• Use a standard MSME claim file order: Policy & endorsements → Sum Insured basis → proofs (GST/invoices) → safety logs → consolidated surveyor queries. This way, everyone is using the same checklist and order.
An industry wise push is crucial which can strengthen the gains. Insurance companies, surveyors, and distribution partners can work together to make a National MSME Fire Valuation Template and a Common MSME Claim Pack that follow BSUS and BLUS wordings and surveyor expectations. They can then test them in a few clusters and then roll them out nationally with translations. With consistent Sum Insured discipline, basic safety, and document readiness, MSMEs will get settlements faster and more predictably; insurers will have less trouble adjusting losses; and the economy will keep its productive capacity where it matters most