The good news for small businesses is premiums are stabilising, after rising last year in the wake of natural disasters like bushfires and floods, as well as COVID impacting insurers, which pushed up prices.
Insurers’ costs rise
According to KPMG Australia’s General Insurance Dashboard, gross written premiums, which is the total value of the policies written by insurers, minus costs such as GST and stamp duty, rose by 5.9 per cent in 2020. This reflects changes in the market, for instance reduced demand for some types of insurance such as compulsory third party (CTP), travel and employers’ liability policies.
The large volume of business interruption claims thanks to the impact of the pandemic on small businesses has also led to a rise in claims’ pay outs.
“There have been significant premium increases over the last few years in the small business market, but this is stabilising now,” says Steadfast Group broker technical manager Michael White.
Nevertheless, small businesses are paying a high price for insurance in some areas. For instance, builders and those in the trades find it hard to take out affordable public liability cover. Business owners in this position should talk to their Steadfast insurance broker about different options available to them. Property insurance is also relatively expensive.
KPMG’s research shows how much certain premiums have jumped over the past year, with the price of commercial property insurance rising 12.5 per cent over the past year and the price of professional indemnity insurance increasing by 22.2 per cent over the same period.
“It’s also an idea for small businesses to work with an insurance broker to ensure they can access the right insurance, including public liability,” says White.
“The good news for small businesses is premiums are stabilising”
One option for businesses that are finding it hard to get cover is to work with a mutualwhich is another type of risk management . There are pros and cons of choosing this approach. While it does offer businesses that find it hard to secure insurance an alternative way to get protection, mutuals have discretion about paying claims.
“It’s important to understand how mutuals work before taking out cover with them,” White explains.
This is especially critical for smaller businesses that rely on insurers to pay their claims swiftly so they can resume trading as quickly as possible after an insurable event. Whereas larger businesses may choose to do business with a mutual if they have more resources to continue trading even when they are waiting on a sizeable claim to be paid.
Working with an insurance broker is one of the best ways to ensure no matter what your circumstances, there is a range of options to consider for your insurance cover. Contact us today to find out more.