'Catastrophic' illegal tobacco trade is crippling retailers with soaring insurance costs.
The secret cost of the illegal tobacco trade can be revealed and it’s not just smokers who are paying the price. Read how you’ll end up paying more.
The “catastrophic” illegal tobacco and vape trade is not only undoing decades worth of public health campaigns to reduce smoking rates, it’s sending small business insurance premiums skyrocketing.
Small business and retail advocate Master Grocers Australia (MGA) states its members, who were located near tobacconists, were reporting policy increases of up to 50 per cent because of the increased risk.
MGA CEO Martin Stirling said organised crime networks were reaping billion dollar profits as they engaged in terrifying firebombing campaigns while small, family-owned businesses were paying the price.
“The illicit tobacco market in Australia is a catastrophic tragedy for so many reasons,” he said.
“Decades of public health achievements linked to tobacco consumption control are rapidly unravelling through an out-of-control illicit market that recklessly distributes cigarettes to anyone, including children, at a discount of at least 80 per cent compared to legal retail prices.”
“If an independent retailer happens to be located near a tobacco store, they are almost guaranteed to have insurance coverage or cost issues because of the elevated risk.”
He said MGA regularly heard many retailers were struggling to obtain insurance cover because they were located near a tobacconist and were forced to pass on the cost by increasing prices.
“When it comes to insurance policy renewal or quotation, reports of year-on-year increases of at least 50 per cent are typical,” Mr Stirling said.
“For a small family-owned independent supermarket, such cost increases are devastating. It can mean that the business is no longer able to generate an income for the family that owns it, it may mean increasing the cost of groceries for families already suffering through a cost-of-living crisis, it can even mean job losses.”
It comes as overworked NSW Health Inspectors have conducted just 10 retail inspections on the Central Coast between January 1 and October 27.
During the raids health inspectors have seized illegal tobacco with an estimated street value of $478,000 and $238,000 worth of nicotine vapes.
Across NSW during the same period inspectors have conducted about 1260 retail inspections and seized more than 11.8 million cigarettes, more than 2000kg of other illicit tobacco products and about 170,000 illegal vapes with a combined estimated street value of $18.9m.
In the same time, NSW Health finalised 17 prosecutions with the courts imposing a total of $597,200 in fines related to e-cigarette and tobacco offences including a $144,000 fine slapped on Uncle Jake’s Tobacco at Ettalong last week.
There are currently 26 prosecutions before the courts including a District Court appeal.
Business NSW Central Coast regional director Scott Goold said insurers were just trying to manage their risk exposure.
“There have been some large and frequent claims where these stores, often shopfront locations, have had large fire claims that then cause damages to the overall building including any units above,” he said.
“As an example there was a claim last month where this exactly happened and resulted in a $2m claim for the entire complex.
“It unfortunately is becoming a very difficult market with many insurers choosing to move out of this market as its becoming less profitable for them.”
Small business insurance comparison and buy site BizCover has experienced a 15 per cent increase in customers over the past year.
CEO Michael Gottlieb said it was not penalising small businesses located near illegal tobacconists with higher premiums.
“Small businesses are under pressure to trim expenses right now and ensure they’re not saddled with inflated insurance premiums,” Mr Gottlieb said.
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Originally published as 'Catastrophic' illegal tobacco trade is crippling retailers with soaring insurance costs.
