Rising Insurance Costs Threaten Australian Small Businesses
Rising Insurance Costs Threaten Australian Small Businesses
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Small business insurance premiums in Australia have surged by up to 60% since 2019, rendering coverage increasingly unaffordable for many enterprises.
The Insurance Council of Australia attributes this escalation to outdated liability laws, escalating legal costs, and governmental red tape.
In submissions to the Parliamentary Joint Committee's inquiry into small business insurance, the Insurance Council has set out a reform agenda targeting the key cost drivers, including:
A national review of liability laws to tackle the claims cost pressures, including rising psychological injury and legal claims, that flow directly through to premiums.
Caps on legal costs and streamlined claims processes to stop legal fees consuming a disproportionate share of compensation payouts and to resolve claims faster.
A national ban on claim farming, the practice of cold-calling or pressuring people into lodging injury claims, which inflates claims volumes and costs.
Fairer government procurement rules so small businesses aren't forced to take out insurance that is far more than the job requires or accept liability for risks they can't insure against.
It has been 25 years since the last major national review of liability laws, and in that time, rising claims costs, legal fees, and system inefficiencies have compounded to make public liability and professional indemnity cover increasingly unaffordable for small businesses and community organisations.
The Insurance Council is also calling for funded risk management programs to help small businesses and community organisations reduce their risk exposure and keep premiums down.
For small to medium business owners, understanding these developments is crucial. Engaging with industry bodies and staying informed about potential reforms can help businesses navigate the evolving insurance landscape and advocate for policies that support their sustainability.
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Actuary: A professional who analyzes the financial costs of risk and uncertainty using mathematics, statistics, and financial theory.
