Small business lacks adequate insurance cover, report claims

Many Australian businesses still don’t have enough insurance to stay viable in another pandemic or natural disaster.

A new report from Business Australia found many operators are hampered by cost and complexity in obtaining adequate cover. Picture Glenn Hampson

Almost two in three small businesses are yet to take out adequate insurance to cover natural disasters despite a horror year of fires, floods and a pandemic, new data reveals.

A new report from Business Australia, which represents thousands of small and medium-sized businesses, has found many operators are hampered by cost and complexity in obtaining adequate cover.

The survey of almost 2000 SMEs found 70 per cent believed they could be doing more to reduce costs of insurance and utilities.

However, 33 per cent were overwhelmed by the administrative burden of overseeing their business insurance policies.

Business Australia chief customer experience officer Richard Spencer said many businesses were hit by the “lazy tax”, with many rolling over old insurance policies without considering whether conditions had changed.

We find in the regular surveys we do of small to medium businesses that the cost of insurance is something you pay without thinking about,” he said.

“In energy people just get used to paying for gas and energy bills. They don’t think about a comparison as to whether they’re getting the right service.”

Mr Spencer said only four in 10 businesses were satisfied with the ease of finding appropriate insurance coverage.

“Insurance is one of those areas of business where we believe businesses are better off trying to get as much advice as they can from specialists in the field,” he said.

“Overinsurance is damaging from a cost perspective.

“No insurance is a really bad idea from a trading perspective.”

Mr Spencer said the recent experience for thousands of Australian businesses seeking to make claims for business interruption insurance highlighted the need for clarity.

“Business owners really need to be fully informed as to what their insurance cover actually covers them for,” he said.

Business Australia signed a deal just before Christmas with large professional services firm AON to provide insurance brokerage advice and services to its members.

The referral service provided under the deal will offer Business Australia members the ability to review their current coverage.

“In AON we found someone with similar values. They’re very strong in the small to medium-sized sector,” Mr Spencer said.

AON managing director — commercial Kevan Johnston said it was concerning how many businesses without appropriate insurance did not continue trading when hit by disaster.

“Our common goals are to ensure that all Australian businesses remain supported through these times, and that means putting into place the right programs for each business, and helping clients make fact-based decisions around issues such as insurance and risk exposure,” he said.