A lot of small business owners do not have adequate insurance protection in relation to business interruption, flood and particular specialty policies, such as Management Liability or Cyber Insurance. This leaves the small business owner exposed in the event of a catastrophe. This has the potential to dramatically reduce the businesses profits or even worse, see the business close their doors for good.
The Insurance Council of Australia’s (ICA) latest investigation into underinsurance and small business shows this is an issue right across Australia, but particularly in Queensland where the problem of affordability comes into the equation. The ICA’s research shows that 12.8% of small businesses in Australia don’t have adequate insurance cover and 10% of small businesses are underinsured for their assets.
Furthermore, the ICA recently advised that flood insurance is one area where businesses typically don’t have enough insurance, which is obviously a major problem. Frequently industrial estates are situated in areas that are not zones for residential development due to flood risk. If floods do come, then it can significantly impact business located in these types of industrial estates.
Incredibly, a large proportion of businesses (even in flood zones) do not accept flood cover even when it is offered to them. The ICA advise that in relation to business interruption insurance, owners frequently purchase bare minimum cover, in the absence of consideration of the broader implications that could affect the company.
Underinsurance doesn’t need to be a worry for small businesses. There are numerous ways small businesses can ensure that they have adequate cover in place.
The first is to accurately recognise key risks. Identify everything that is critical for the business to continue to operate. For example, this may include loss of access, and/or loss of power. It is important to work with your insurance broker to establish how much cover you need and what it will cost.
In our experience, the companies that appreciate the value of insurance are unfortunately frequently the ones that have previously incurred a loss or know other business owners who have. Through experience, the owners understand the value of insurance and more importantly, what it takes to recover. Regardless, all business owners should make an informed decision about the level of cover they require.
Understandably many companies are facing challenges at present as a result of Covid-19. That said, it is important for businesses not to cancel or let their insurances lapse if they are reducing costs as a result of the pandemic. When a business is already on it’s knees, a fire or flood could prove to be the final blow. In these challenging times, it has never been more crucial to make sure the business is adequately covered.
We have seen examples where during Covid-19 lockdown businesses dramatically reduced there insurance cover, but when businesses reopened and trading picked up, they forgot to increase their insurance accordingly.
Small businesses that are worried about their insurance cover should contact FD Beck Insurance Brokers to find a solution to make sure they have the adequate insurance protection in force.
For the past 27 years Simon has enjoyed a career in the Insurance industry as both a broker and underwriter. Prior to being a director at FD Beck Simon had a successful 8‐year management career with one of the worlds largest general insurers, which saw him deal with and structure insurance programs for some of Australia’s largest insurance purchasers.
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