Small Business Ombudsman continues to highlight insurance challenges

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson is continuing to highlight the challenges small family businesses in finding adequate insurance cover at commercially viable terms.

Writing in the Canberra Times earlier this month in an opinion piece title ‘excessive insurance premiums are killing small businesses’, Billson advised that “there have been countless examples of small businesses closing down because they either can't get the insurance they need, or when it is available, they can't afford the prohibitively ridiculous premiums on offer, which in some cases have risen by 200 or 30%.”

In his article, Billson referenced the example of “play centre that was told it would only get insurance at a very expensive price with behemoth excesses if it ditched its ninja obstacle course - its biggest earner.

“(This was) despite having no claims, a well-developed risk management system, active supervision and monitoring and the help of an experienced broker, there was no insurer 'appetite' to cover this activity. The business was forced to close and the jobs, service to the community and resulting economic activity were lost.”

Billson also pointed out how live entertainment and music venues “have been heavily affected by the lack of suitable insurance cover to continue what they have been doing for decades.”

He went on to recall how the 2021 The Show Must Go On report, that he produced in his role as ASBFEO, had called for the creation of an attractions industry known as a Discretionary Mutual Fund (DMF) as an alternative model to “skyrocketing insurance costs”.

The initial report and the subsequent report Additional Insights Supporting a Discretionary Mutual Fund for the Amusement, Leisure and Recreation Industry, backed calls by the Australian Amusement, Leisure and Recreation Association (AALARA) for a DMF to be created with Federal Government funding.

However, in December last year, Billson admitted that the initiative has not been successful in securing Federal Government support.

Advising that it was “disappointing” that the recommendations had not been embraced, Billson noted “over summer we've seen floods, storms and bushfires devastate some small businesses. The insurance sector can do more to be clear about what is and is not covered when a disaster hits a small business. Despite the reassuring advertising, complaints to regulators about claims being denied and a lack of responsiveness by insurers remain high.

“We are already hearing complaints about insurance companies still holding up claims from terrible floods last year and a federal parliamentary inquiry is examining the response. Typically, these claims are mainly related to property, public liability and business interruption issues.”

Listing business frustrations, Billson acknowledged “the insurance sector has explained the problem is a global one, described as a hardening of the market which means capital is scarce, reinsurance is difficult to obtain and risk appetites are low.

“In its 2022 annual report the Insurance Council of Australia indicated it would be a priority to address the availability and affordability of insurance … yet, still too many small businesses are not able to access and afford the insurance they need.”

Billson concluded “I'm pleading with the insurance sector to help small business by mapping out pathways to solutions to give small business the chance to stay in business. Urgent and decisive action is needed to ensure essential insurances for small businesses are understandable, accessible and affordable.”

AALARA and an industry DMF
AALARA’s call for a DMF was on a 2022 survey of its members and industry stakeholders which revealed that amusement and attractions-related businesses had been facing 300% price hikes for their insurance over the past couple of years.

As an example, it noted that theme parks had struggled to secure affordable insurance coverage as public liability insurance prices jumped from $150,000 to up to $1.5 million over the previous four year period.

The amusement and attractions industry employs over 7,000 people in Australia and contributes $1.84 billion to the economy.

AALARA will be staging its 2024 Conference and Trade Show at the Gold Coast Convention and Exhibition Centre from 20th to 23rd May.

Click here for more information on the event in the Australasian Leisure Management industry Calendar.

Images: Australian Small Business and Family Enterprise Ombudsman Bruce Billson (top, credit: ASBFEO) and Albany Indoor Adventures was reportedly forced to close at the end of last year as a result of not being able to secure insurance (below).