Why Startup Founders Need an Insurance Plan Beyond Funding

Finance Minister Nirmala Sitharaman stated that the government will focus efforts on expanding coverage with insurance and pension schemes, improving access to credit, AI training, and conducting banking reforms to stimulate financial inclusion.

'Insurance for all' will be a key focus in the government's financial inclusion agenda. The ministry aims to increase access to insurance and pension schemes, especially among the least affluent segments of the population, announced Finance Minister Nirmala Sitharaman on Monday. The government is also prioritizing broader access to credit and plans to establish AI training centers in every district to bridge the gap between industry requirements and youth skills.

At the 'Algorithm of Inclusion' event in Mumbai, organized by HSBC, Sitharaman noted that public insurance and pension programs will continue to play a vital role in providing financial protection to vulnerable groups in society. Schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana offer insurance coverage at minimal contributions, while state-subsidized pension programs are intended for those unable to work. The minister emphasized the government's commitment to ensuring that every needy person is covered by these schemes.

The government's emphasis on expanding insurance coverage aligns with the vision of the Insurance Regulatory and Development Authority of India (IRDAI) to achieve 'Insurance for all by 2047'. This initiative aims to guarantee every citizen access to adequate life, health, and property insurance, and to cover businesses against relevant risks. The regulator is focusing on enhancing the accessibility, convenience, and affordability of insurance products, particularly in underserved and rural areas. Initiatives within this effort include Bima Sugam, a proposed digital insurance marketplace, Bima Vistaar, a combined insurance product, and Bima Vahak, a last-mile distribution network with a focus on women.

Another priority is ensuring access to formal credit, especially for individuals looking to start or expand their businesses. Furthermore, the government is working to address the mismatch between the skills of young people entering the workforce and the needs of employers. Sitharaman stated that the ministry wants there to be an AI training center in every district, allowing youth to acquire industry-relevant skills closer to home.

The government will also support states in modernizing Industrial Training Institutes (ITIs), many of which lag behind changing industry demands. The ministry will provide funding, and states can identify leading trainers.

Regarding the banking sector, Sitharaman reported that the government will form a high-level committee to study future sector needs and develop recommendations for strengthening the Indian banking system. Although Indian banks have recovered from the difficulties of 2014–2015, the sector must continue to evolve to meet the demands of a growing economy. The committee will consult with industry participants and experts before presenting its findings.

The Ministry of Finance announced last week that the chairman of the committee will be Suresh N Patel, former Central Vigilance Commissioner (CVC), who has over thirty years of experience in the banking sector. Patel held positions as CEO and Executive Director of Andhra Bank and Oriental Bank of Commerce. The committee includes Shirish Chandra Murmu, Deputy Governor of the Reserve Bank of India (RBI), Padmaja Chundru, former Managing Director and CEO of Indian Bank, and N. S. Vishwanathan, former Deputy Governor of the RBI. The committee secretary will be the Joint Secretary (Banking) of the Department of Financial Services. According to the Ministry of Finance statement, the committee has six months to complete its work, until April 2027.

Explaining the resilience of the Indian economy amid global uncertainty, the finance minister linked it to strong domestic demand, rising purchasing power, and policy stability. She noted that growth in domestic consumption is being observed due to the large domestic market and the rising purchasing power of the middle class. While exports remain important, the expansion of the domestic market has added extra strength to the economy.

Sitharaman also attributed the decline in poverty levels to a combination of social security measures and improved access to healthcare, education, food security, and financial services. Medical coverage under the Ayushman Bharat scheme, which provides up to 5 lakh for treatment to eligible families, has helped protect households from high out-of-pocket healthcare expenses. Such expenses often force rural families to sell land and other assets to pay for treatment. Additionally, free grain distribution programs, housing, sanitation, and water supply initiatives have contributed to improved living conditions.

The finance minister also stressed the need to maintain fiscal discipline while simultaneously increasing government spending to support economic growth. Capital expenditure has significantly increased over the last four to five years, and the multiplier effect has also grown. She stated that the government will continue to support growth through capital expenditure while maintaining fiscal responsibility so that India's growth momentum does not slow down.

Although most citizens are familiar with the word 'insurance,' few realize how broadly the insurance system covers various aspects of the economy and society. Umid Khudayberdiyev, founder of three insurance companies and a specialist with over twenty years of experience in this field, presented methods and technologies for operating the insurance market during the FINNEXT Asia forum in Tashkent on November 19. Previously, he worked at the State Insurance Supervision under the Ministry of Finance of the Republic of Uzbekistan.

Drawing on his extensive experience, Umid Khudayberdiyev explained that the economy is a complex system where the interests of the state, business, and citizens constantly intersect, and therefore it is acutely in need of protection. Insurance acts as a key tool for financial defense, contributing to the stability of the national economy, attracting investment, and reducing the burden on the state budget.

The benefits of insurance are distributed among three main groups: the population, which receives stability and protection from sudden financial losses; the state, which partially assumes the function of protecting the population by evenly distributing economic risks; and investors.

When asked about the low level of financial literacy in the country, which leads to the neglect of insurance, Umid Khudayberdiyev suggested correcting the term, pointing to insufficient awareness. He noted that people intuitively understand physical risks, but abstract financial and insurance systems require specialized knowledge.

With the active development of digital platforms in Uzbekistan, such as Gov.uz, MyID, and banking fintech services, the number of fraudulent schemes is also growing. Insurance can protect both individuals and companies from such threats, especially when there is a lack of knowledge in the field of financial protection.

He also mentioned products such as cyber insurance and document insurance. Furthermore, although the state guarantees deposits up to 200 million soms, special insurance products exist for amounts exceeding this limit to help protect citizens' funds from fraudsters.

A transparent mechanism for protecting investor funds is critically important for attracting foreign capital. A serious investor is primarily concerned with the preservation of their capital, not just potential profit. In developed countries, decisions are made collegially, and proof of transaction security is required before major projects.

The reliability of the economy is assessed through the maturity of the insurance market: how quickly it pays compensation and covers domestic risks, rather than relying solely on reinsurance abroad. Since the state cannot provide unlimited guarantees, banks, funds, and insurance companies must independently offer quality assets.

It was noted that there is an imbalance where the banking sector outpaces the insurance sector. However, the insurance industry is actively catching up with the support of banks and the state. Since 2008, three key laws on mandatory insurance have been adopted in Uzbekistan: motor vehicle owner liability, employer liability insurance, and carrier liability insurance.

In the field of Islamic finance, Islamic insurance (Takaful) is entering the market, meeting citizens' needs to preserve savings in accordance with their values, which is an important element of harmonious market development.

High birth rates in Uzbekistan are viewed as a huge resource and the country's main advantage, despite the enormous strain this places on infrastructure and the economy. The expert emphasized that the country is coping with these challenges, and with systemic investments in education and human capital, Uzbekistan can significantly surpass other countries both economically and socially.

Regarding poverty, which may increase with a large population, it is noted that the relevant ministry is systematically working on this issue. The fight against poverty is a comprehensive state program that includes construction, education, and social support. The President rightly noted the achievement of the level of Turkey and Europe in the speed and quality of construction.

The financial sector is interested in developing insurance because commercial banks bear risks associated with non-performing loans (NPL) or damage to collateral. Without insurance coverage, the entire risk falls directly on the bank. Therefore, the development of the insurance sector is critically important for banks.

The main goal of insurers is not only to generate income but also to deeply integrate insurance into the economy and society of Uzbekistan. It was concluded that without insurance, movement is possible, but high levels of development are unattainable.

Risks are a brake on economic growth. The absence of insurance protection forces businesses to avoid risky operations due to fear of losses. The economy is forced to slow down and spend resources on liquidating the consequences of technological and natural disasters. Net economic growth is defined as real progress minus losses from all types of risks.

Entrepreneur Vusi Thembekwayo asserts that simply gaining access to capital is insufficient for transforming small businesses into sustainable enterprises; timely fundraising, building strong teams, and developing growth support systems are critically important.

In the book 'Underdogs: How Small Players Can Become Business Titans,' co-authored with business consultant and finance lecturer Michael Hinton and published by Jonathan Ball Publishers, Thembekwayo examines these complexities. The book analyzes how small companies can compete with large players by finding market opportunities, understanding customers, and effectively utilizing limited resources, without assuming that growth necessarily means becoming the largest in the market.

Thembekwayo emphasized that the book's goal was not to idealize the difficulties of running a small business, but rather to demonstrate to entrepreneurs examples of how others overcame similar obstacles. He noted that the book serves as a practical guide for 'outsiders' on the actions of other similar players.

Thembekwayo stated that an effective strategy and its implementation cannot replace adequate financing, especially for companies aiming to expand their operations. He clarified that these factors are not mutually exclusive: success requires both good ideas and strategy, as well as funding.

Furthermore, he pointed to the importance of capable management teams, operational excellence, continuous improvement, and the ability to attract qualified staff to ensure sustainable development. In his words, it is impossible to imagine a situation where resource limitations from funding would not constrain business growth.

Citing research, Thembekwayo reported a funding deficit of $350 billion for micro, small, and medium enterprises in South Africa. He argued that increasing the number of suppliers and funding products has not solved the problems entrepreneurs face when seeking funds. He called on banks and the government to support enterprises in their early stages of development, demanding 'patient venture capital.'

For Thembekwayo, not only the presence of money is critical, but also the timing of its arrival, especially for those transitioning from starting a business to scaling it. He concluded that 'money itself is not the limitation. It is important when money finds you.'

Thembekwayo stressed that business scaling requires a targeted approach, not just hope for growth. He defined scaling as a science, not a wish or a religion. He outlined five priority areas for entrepreneurs: strategy, customers and competitors, autonomy and automation, leadership, and energy.

These areas include defining a clear line of business, understanding the needs of customers and competitors, creating systems and standard operating procedures, investing in personnel development, and building leadership capacity. Thembekwayo warned that entrepreneurs might limit their potential by remaining the sole drivers of all operations, as 'it is impossible to scale beyond oneself.'

The book 'Underdogs' uses examples of companies such as Nando’s, Canva, and Under Armour to show how small players found opportunities and solidified their competitive positions. Thembekwayo cited Nando’s as an example of founders who supported an unconventional vision, while Canva demonstrated the importance of positioning a business within an ecosystem that provides access to networks and opportunities.

He argued that no amount of ingenuity and character can surpass an ecosystem, insisting that entrepreneurs must consider their location and proximity to customers and potential partners. The book challenges the assumption that small businesses should copy the strategies of larger competitors; instead, it explores how companies can find gaps in the market, respond to consumer needs, and build systems that support sustainable growth.

Co-author Michael Hinton, who has worked with leading African brands and corporate boards for over 25 years, stated that the lessons in the book are relevant to small and medium-sized enterprise owners. Hinton also teaches at the Gordon Institute of Business Science (GIBS). He added that none of the businesses in the book started in ideal conditions, but they had the discipline to keep going and the willingness to act differently from large players, which is accessible to any business owner, regardless of size.