Adelaide tobacco dealers face $100,000 insurance premium hike amid underground war

If the spectre of underground figures isn’t already costing Adelaide’s legal tobacco dealers headaches, this move from big business will.

Legitimate South Australian cigarette retailers could soon face annual insurance premium hikes of up to $100,000, potentially driving them out of business and further bolstering the stronghold of organised crime gangs on the local illegal market, a peak national retail body warns.

Australian Association of Convenience Stores chief executive Theo Foukkare said the ongoing illicit tobacco war being waged across SA could “absolutely” raise yearly insurance premiums by six figures, as cigarette stores increasingly become greater liabilities to insurers.

SA Police suspects at least 17 arson attacks, which have mainly targeted cigarette shops over the past four months, are linked to growing tensions between three warring rival organised crime gangs.

Mr Foukkare said some insurance companies were hiking up annual premiums for Victorian tobacconists by up to $100,000, as the eastern state’s escalating tobacco war continued to rage, and SA would likely follow suit.

“I would suspect that legitimate retailers in South Australia, and all around the country, are going to have similar discussions around their insurance premiums if this (illicit tobacco war) continues along the same lines,” Mr Foukkare said.

“In a lot of cases it would make the businesses marginal and then they would obviously have to make the decision ‘what do I do?’

Mr Foukkare said it was “simply unfair that some businesses will have to close because of this issue”.

“It just gifts the market to the black market,” he said.

Australian Association of Convenience Stores chief executive Theo Foukkare. Picture: Sam Ruttyn

Issues with insurance premiums began the surface in Victoria about six months ago.

“It started off with a body corporate of an apartment complex trying to renew their insurance back in May of this year,” Mr Foukkare revealed.

“We got wind of the insurance for the complete building being rejected on the basis that it actually had a store that sold tobacco in one of the commercial premises at the bottom of the building, so they actually had to go overseas to get their insurance for their building and their costs doubled.”

While Mr Foukkare was unsure of the exact price rise, he believed it was around $100,000 above the previous premium.

Since then, the union has received four separate reports of Victorian retailers being slapped with massive premium increases, and in one case the body corporate and landlord terminated the lease of a shop because they were concerned the business may fall victim to the illicit tobacco war.

“That body corporate specifically chose to terminate the lease and they gave the operator seven days to vacate, so that’s terrible for the operator because they were a legitimate retailer,” he said.

He said another business was slapped with a $39,000 premium increase, while another that was recently hit with a $100,000 hike was currently evaluating whether to remain open or shut up shop.

“It’s extremely unfair on these legitimate retailers who are trying to abide by the law are now being impacted with these exorbitant insurance costs,” Mr Foukkare said.

Mr Foukkare said NSW businesses were also starting to be affected, with some shops being told they could only secure limited insurance coverage.

SA Police established Operation Eclipse in September to crackdown on criminal activity associated with illicit tobacco across the metropolitan and regional areas.

Almost $4 million in tobacco products and close to $900,000 in cash has been seized so far, while 17 people have been arrested for various offences including money laundering, blackmail, serious criminal trespass and arson.