INSURANCE BECOMING A MAJOR CHALLENGE FOR RECOVERY

The state’s peak business organisation, Business NSW says its members have named insurance as the biggest negative cost driver for their businesses.
“There’s no doubt that businesses need the ability to protect against catastrophic loss. We are seeing this clearly in the Northern Rivers right now. Without these protections, business owners become personally liable which in not tenable and this makes NSW less globally competitive,” said Business NSW Regional Manager Jane Laverty
“As insurance premiums increase and risk becomes more ‘uninsurable’ or unaffordable through existing market mechanisms, we are at a moment when Government, partnered with industry, need to consider alternative models so that we remain globally competitive,” Mrs Laverty said.
“The NSW Government and business has led the world in financial service innovation, and we now have an opportunity to re-think how business can obtain coverage, price risk, and continue to thrive in a fast-changing world.
Business NSW is currently exploring ways to improve the system, whether it be through legislation, Discretionary Mutual Funds (DMFs), other insurance alternatives and other policy settings that ensure the sustainability and resilience of NSW businesses.
“We welcome market innovators to engage with us to drive this change.” Says Mrs Laverty.
“Our research suggests that the problem is much bigger than just insurance costs with wider trends around insurability presenting significant challenges for businesses globally. These trends include:
• Premiums escalating year on year from 20% to over 100% in some cases;
• Product exclusions rising, leading to businesses being under-insured;
• Insurance sub-segments exhibiting market failure where risk is either uninsurable or unaffordable;
• Number of uninsurable businesses even after decades of coverage;
• Number of insurance providers leaving the market;
• Urgent need for Government and industry intervention/reinvention. This will likely require new legislation (and in some instances underwrite some risks) to ensure businesses can continue to operate
• Review of alternative models, such as, Discretionary Mutual Funds (DMF) that could provide an alternative for businesses that can group common risks
• The rise of natural disasters (bushfires, floods, etc) and geo-political instability raising the risk that insurance costs limit growth for several business sectors.
“Speaking with businesses across the region this week, there is the obvious concern about staying in a town that is uninsurable and just as much fear from those with previously acceptable premiums that this will no longer be the case and will have a significant impact on their business costs”. Mrs Laverty said.