Industry operators impacted by rising insurance premiums

Beyond the challenges presented by the Coronavirus pandemic, 2020 is also seeing operators across the leisure industry facing major issues of insurance availability.

Australasian Leisure Management continues to hear of operators across the industry encountering policy denials and soaring premiums, with attractions, recreation and tourism being particularly hard hit.

The Australian Amusement, Leisure and Recreation Association (AALARA) has recently informed members “as many of you know first hand (insurance) … is becoming more difficult by the day to obtain public liability protection within our industry. With many operators being refused cover entirely.

“AALARA believes this situation is only going to get worse in the future.”

A recent survey on business insurance by the Australian Industry (Ai Group) generated comments including:

“The insurance market is now to the stage where you will have no choice but to be uninsured. There is simply no market to get a quote in some circumstances.”

“We had to resort to using overseas insurance companies at exorbitant premiums. These are not licensed in Australia.”

“The excess went from $100,000 to $250,000 and the premium from $224,000 to $757,000.”

With the Australian Small Business and Family Enterprise Ombudsman called an inquiry earlier this year to investigate insurance practices and cover availability after receiving complaints about policy denials and soaring prices, businesses including adventure and outdoor operators, caravan parks, hotels and trampoline centres have issued stark warnings on insurance availability during the current hard market in submissions to an inquiry.

As insuranceNEWS.com.au has reported, among the responses caravan park businesses and associations say that a lack of available insurance and spiralling prices could spell the end of a multi-billion-dollar industry which is a huge employer in regional areas.

The Caravan Industry Association of Australia’s submission stated “access to affordable and adequate insurance coverage is crucial to the ongoing viability of the sector.

“However, in recent years, caravan park operators are increasingly expressing their difficulties in obtaining coverage, excessively high premiums, limitations on policy extensions and reduced options in the market.”

Big4 Holiday Parks says areas with increased natural disaster risk are particularly hard hit.

Its submission noted “if this issue is not fixed in the next couple of years, it is likely that the industry will be brought to its knees with investment stopping and facilities and activities being removed.”

Tasmania’s Huon River Jet Boats told the inquiry that despite contacting about 40 underwriters not one was prepared to take on its risk, despite its excellent safety record.

Its submission stated “adventure tourism thrives in New Zealand but this is only because of the foresight of the New Zealand Government in creating the Accident Compensation Commission and providing business with a stable insurance environment in which it can operate.

“For adventure tourism to survive and thrive within Australia a similar system to that in New Zealand needs to be implemented.”

Western Australia’s Margaret River Busselton Tourism Association reports that many businesses have been “refused insurance”.

“The future of these professional tourism businesses is seriously threatened as they are unable to access or afford insurance for their operations. Specifically, the businesses affected either cannot get terms for cover, or face unaffordable increases in premiums, with the result that operations are no longer viable.”

The owners of Hamilton Island put forward a submission outlining a 300% insurance increase in four years from $1.7 million to $5.2 million.

It advised “over the past decade we have seen our own ability to obtain any insurance cover from the Australian market whittle to zero.

“In recent years we have been required to place our insurance in the London market.”

They join other Queensland submissions in calling for further investigations into a government-backed cyclone reinsurance pool.

Commenting on responses received Australian Small Business and Family Enterprise Ombudsman, Kate Carnell advised “the feedback we’ve had from small businesses so far has been insightful and concerning, with many small businesses claiming to have been denied insurance outright.”

The Ai Group survey report Business Insurance: Unaffordable or Unavailable?, reveals that “insurance stress” is increasingly an issue.

Respondents advised that in seeking insurance cover, the most common type sought was public liability (89.2%), followed closely by workcover (87.3%) and property insurance (81.4%).

More than half (53.3%) of the respondent businesses reported “unusual trouble” obtaining insurance, while 42.1% reported no problems.

The most common issue was high growth in premiums (reported by 55.6% of businesses with problems seeking insurance). Coverage being too limited was reported by 14.8% and “inability to obtain desired insurance at all” by 13.6%.

Some businesses reported multiple problems. The most common “other” problem reported was a reduction in competition, with fewer insurers offering relevant cover.

The report also investigates the reasons behind the hardening market with climate change and the increasing severity and frequency of natural catastrophes identified as factors which are contributing to rising reinsurance costs - which are then passed to consumers.

Images: Jumping Pillow at the BIG4 Grampians Parkgate Resort (top), Huon River Jet Boats (middle) and a pool at Hamilton Island (below).