Business News

Aussie small businesses at risk of underinsurance

Published

2 years ago

5 August 2022

JeffG

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Aussie small businesses at risk of underinsurance

BIZCOVER

Australian small businesses are at risk of underinsurance, with a recent report showing that many SMEs have become complacent and have no protections in place if a negative event were to occur.

Only 43% of small businesses think they are fully covered from insurable business risks, according to the newly-released bonus chapter of the Vero SME Insurance Index 2022.

While this shows a level of understanding among small businesses about their cover levels, 34% said they have no plan if something bad were to happen, the survey found. Some others haven’t even thought about what might happen or simply choose to cross that bridge when they come to it.

“Small businesses seem to be generally aware that they may be underinsured however due to the additional cost of increasing coverage some may have made a choice to not look further into their cover due to price concerns,” says Jane Mason, Head of Product Channels and Risk at SME insurance platform BizCover,

“What’s worrying is that the dangers of underinsurance can leave the insured in a worse situation if underinsured or not insured at all.”

The conditions are set for an underinsurance crisis

From floods, bushfires, and the Covid-19 pandemic to supply chain issues and the rising cost of living, Australian small businesses have had to contend with multiple problems in recent years.

This has had an impact on the revenue of many businesses, causing some to look for ways to save money.

Vero’s report suggests that SMEs with declining revenue are less likely to say that they are completely covered and are also less likely to have a plan in place for a negative situation.

“It’s tough out there. And unfortunately, some businesses put their insurance on the chopping block,” says Mason. “But what this also says is that the businesses who are more likely to be hit by underinsurance are already struggling.”

Exacerbating the issue is that rising inflation and major supply chain disruptions are pushing up the claims costs for insurance companies, which ultimately results in higher premiums across some types of insurance.

This can put businesses who are renewing their coverage at the same levels as the year before at risk, as the cost of equipment, stock or machinery has, in many cases, increased beyond what they were originally insured for.

“What was adequate cover a year ago may not be adequate cover now because of the rising cost of materials,” says Mason.

The risk of underinsurance

For Aussie businesses, what all this means is that some could be left with a serious financial crisis by not having enough insurance to cover their loss.

For example, say you insure your business for $100k and a fire rips through your store destroying it. Once you factor in the cost to repair your business, the total bill comes out to $160k in damages. That’s $60k you’ll have to pay out of your own pocket.

Another way you can fall into the underinsurance trap is by triggering a underinsurance clause.

These clauses are designed to discourage businesses from purposely undervaluing their assets and are triggered by underinsuring usually by 20% under the true value.

Importantly, this occurs even if the damages fall within the insured amount.

So, in the above example, even if the damages were only $40k, your insurer will not cover that full amount if the clause is triggered despite you having $100k of cover.

“Many people may think that the insurer will cover it since the cost of the damages easily falls within the insured amount but that is sometimes not the case if the business is underinsured,” says Mason. “If you purchase below what your business’ true value is, you could become responsible for the share of the loss and not receive full payment for your claim.”

What can small businesses do?

While the current situation is tough, there are some things Australian small business owners can do to avoid being underinsured.

Regularly scheduling some time to consider your exposure to risks could help avoid problems later down the track. This will allow you to consider what risks your business is exposed to and think about the possible scenarios that could happen if you weren’t protected in the event of a claim.

“It’s important to insure your business for an amount that is sufficient to cover not only the tangible assets, but the cost of repairs and any other variables that might leave you out of pocket,” says Mason. “After that, consider jumping online to compare quotes so you could then decide whether the price of the cover justifies the protection.”

While reviewing your cover at renewal is a great time to consider your options, you could check in at any point throughout the year.

And with inflation and the cost of claims rising, it’s become even more crucial to regularly keep track of the actual value of your building and business contents to avoid being left with inadequate cover if a claim were to arise.

*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.  © 2022 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769 

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Business News

Workforce barriers tripping up young Australians and how to overcome them

Published

21 hours ago

25 July 2024

Liam

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Workforce barriers tripping up young Australians and how to overcome them

Only half of young people feel confident in achieving their current or future career aspirations due to workforce barriers, new research has found.

This, coupled with a youth unemployment rate of 9.7% as of May 2024², underscores the critical need for targeted support and resources to equip young individuals with the foundational skills essential for navigating today’s complex job market.

For young people, particularly those from marginalised groups like Indigenous youth and women, there are additional barriers that exacerbate the challenge in securing employment and advancing careers including things like systemic inequities, limited access to quality education and training as well as pervasive social biases.

For example, recent studies have shown that 37% of women working in predominantly male environments report experiencing gender-based competence challenges³.

Employment services provider atWork Australia is addressing these challenges head-on by spotlighting the empowerment of young talent in preparation for World Youth Skills Day on 15 July, providing comprehensive support to young individuals, ensuring they have the necessary skills and assistance to confidently enter the workforce.

Over the last year, atWork Australia has supported over 7,300 young people (aged 25 years or younger) on their individual employment journey across metropolitan and regional Australia. Trends show that hospitality, warehousing and retail are the most appealing industries for young people to seek out. atWork Australia celebrates and applauds youth transition to all industries as each individual embarks on their employment and career journey.

One inspiring example is atWork Australia client, 18-year-old Yasmine, a determined Indigenous young woman from Mount Druitt, New South Wales. Through atWork Australia’s guidance, Yasmine defied odds and successfully entered the traditionally male-dominated mechanical industry.

Yasmine’s journey, starting from when she left school in Year 10, it reflects her resilience in overcoming significant challenges. Initial barriers included securing additional work hours and attending appointments due to financial constraints. Yasmine found crucial support from atWork Australia for emotional, mental and educational barriers as well as practical needs like food vouchers and travel costs⁴.

“atWork Australia has been a tremendous support for me,” Yasmine shared. “They kept me informed about job opportunities and reached out to discuss potential roles. It was empowering to be able to communicate my interests and preferences directly to them.”

Navigating her way through interviews and her initial week on the job, Yasmine benefitted from the guidance of atWork Australia’s Indigenous Connections team, who provided essential mentorship and support.

Despite encountering scepticism and doubts as a woman in a male-dominated field, Yasmine persevered, impressing her colleagues with her skills and determination.

“At 18, there were moments of self-doubt, especially being an 18-year-old female in this industry, but with atWork Australia’s unwavering support, I gained confidence and pushed through,” Yasmine reflected.

atWork Australia will continue to assist Yasmine until she feels fully settled in her new role and is committed to supporting her journey towards achieving her long-term goal of saving for a house deposit.

Yasmine’s story exemplifies the transformative impact of tailored support and mentorship in empowering young individuals to thrive in challenging environments.

atWork Australia is dedicated to providing comprehensive support to young individuals, ensuring they have the necessary skills and assistance to confidently enter the workforce.

To find out more about atWork Australia’s support services, please visit: www.atworkaustralia.com.au. Additionally, you can listen to any of the podcasts from the ‘Candid Conversations with Shaun Pianta’ podcast series here where atWork Australia Brand Ambassador and Paralympian, Shaun Pianta, speaks about his employment journey, following a life-changing holiday.

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Business News

Scrap Metal Company and Directors Fined for Mass Limit Breaches

Published

21 hours ago

25 July 2024

Liam

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Scrap Metal Company and Directors Fined for Mass Limit Breaches

A Melbourne-based scrap metal company and its three directors have been fined for failing to manage legal mass limits after an investigation uncovered 69 mass limit breaches over two years.

The National Heavy Vehicle Regulator (NHVR) Safety and Compliance Officers intercepted one of the company’s heavy vehicles in April 2021, discovering it was loaded at 120.42% of the prescribed mass limit.

Subsequent investigations revealed 69 mass limit breaches, including 24 severe risk breaches, defined as loads at 120% or more of the mass limit. The company pleaded guilty to a Category 1 offence under the Heavy Vehicle National Law (HVNL) and was fined $180,000.

The three directors also pleaded guilty to failing to exercise due diligence and ensure transport safety, receiving fines of $8,500, $7,000, and $7,000, respectively.

NHVR Acting Director of Prosecutions Elim Chan emphasised the dangers of overloaded heavy vehicles. “Heavy vehicles loaded beyond their prescribed mass limits pose serious public safety risks by compromising stability, steering, performance, and braking capability,” Ms. Chan said.

She stressed the importance of proper systems and training to ensure compliance with the HVNL and protect both drivers and the public.

The NHVR offers online tools and guides to assist with loading requirements. For resources, visit NHVR Loading Guides View the resources.

For more information on NHVR prosecutions, visit NHVR Prosecutions.

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Business News

In June Australian unemployment dropped to 8.3%; lowest unemployment since September 2022

Published

21 hours ago

25 July 2024

Liam

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In June Australian unemployment dropped to 8.3%; lowest unemployment since September 2022

In June 2024, Australian ‘real’ unemployment dropped 62,000 to 1,307,000 (down 0.4% to 8.3% of the workforce). This is the lowest rate of unemployment for nearly two years since September 2022 although overall employment is virtually unchanged above 14.3 million.

Although unemployment decreased in June as people left the workforce, under-employment increased by a similar amount in the month, up 65,000 to 1,403,000. Taken together overall unemployment and under-employment in June is virtually unchanged at 2.7 million (17.3% of the workforce).

The June Roy Morgan Unemployment estimates were obtained by surveying an Australia-wide cross section of people aged 14+. A person is classified as unemployed if they are looking for work, no matter when. The ‘real’ unemployment rate is presented as a percentage of the workforce (employed & unemployed).

Overall employment reaches virtually unchanged in June near record high above 14.3 million:

Australian employment was virtually unchanged at 14,307,000 (down 3,000) in June. There was a shift to more part-time employment though with 4,941,000 (up 72,000) now employed part-time while full-time employment was down 75,000 to 9,366,000. Increasing part-time employment is often associated with a rise in under-employment – which increased by 65,000 in June.

Unemployment decreased for a second straight month in June to its lowest for over a year:

In June 1,307,000 Australians were unemployed (8.3% of the workforce, down 0.4%), a decrease of 62,000 from May and the lowest level of unemployment for over a year since May 2023 (1,258,000). It is also the lowest rate of unemployment for nearly two years since September 2022 (8.1%).

The fall in unemployment was driven by fewer people looking for full-time work, down 131,000 to 469,000 while there was an increase in those looking for part-time work, up 69,000 to 834,000.

Overall unemployment and under-employment was virtually unchanged at 17.3% in June:

In addition to the unemployed, a further 1.4 million Australians (9% of the workforce) were under-employed, i.e. working part-time but looking for more work, up 65,000 from May. In total 2.7 million Australians (17.3% of the workforce) were either unemployed or under-employed in June.

Comparisons with a year ago show rapidly increasing workforce is driving employment growth:

The workforce in June was 15,610,000 (down 65,000 from May, but up 404,000 from a year ago) – comprised of a near record high 14,307,000 employed Australians (virtually unchanged from a month ago but up a massive 673,000 from a year ago) and 1,303,000 unemployed Australians looking for work (down 62,000 from a month ago and down 269,000 from a year ago).

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