What’s driving insurance to new heights?

Insurance costs are rising at their fastest pace in more than two decades, according to the Australian Bureau of Statistics.

Data from the ABS’s December quarter report showed that while overall inflation moderated, with the Consumer Price Index at 4.1 per cent year-on-year, general insurance costs rocketed up 16.2 per cent. This was the largest annual jump since March 2001.

That price spike is being felt across both private and business sectors, with the Australian Competition and Consumer Commission’s most recent Insurance Monitoring report finding that from 2021/22 to 2022/23, business insurance premiums across various Australian regions rose an average of 15-22 per cent for SMEs with less than $5 million insured. The highest increases were in Western Australia’s north and the Northern Territory.

Individually, some businesses, particularly in the entertainment, accommodation and leisure industry, have reported much larger leaps in the cost of mandatory public liability cover.

Owner of The Old Bar in Melbourne’s Fitzroy, Liam Matthews, told The Age in January his public liability insurance had jumped from $10,000 a year to $60,000 in the past two years, despite the venue never having made a claim. And Perth live music venue Badlands closed its doors in December last year, citing a ten-fold increase in the cost of public liability insurance despite, also, never having made a claim.

In January, Australian Small Business and Family Enterprise Ombudsman Bruce Billson pleaded for urgent and decisive action from insurers to help businesses understand how risk was being assessed and could be mitigated.

“Live entertainment and music venues have been heavily affected by the lack of suitable insurance cover to continue what they have been doing for decades. While small professional services firms face skyrocketing insurance costs despite making no claims,” he wrote.

“Unlike households who, for many reasons, might choose to be uninsured or under-insured … a small business must have insurance covering areas such as public liability.”

What can businesses do?

While business peak bodies, government and regulators grapple with how to address recent sharp rises there are some things SMEs can do to try to keep premiums down.

The information provided in this article is specific to the particular situation described and individual experiences and results may vary. Past performance is not an indication of future performance and no representation or warranty is made that the information contained above is appropriate for any particular circumstances or indicates that a particular course of action should be followed.
Please note AAP Finance Brokers and Australian Finance Group Ltd does not provide financial product, tax, legal, or accounting advice. Any information contained in this document is of a general nature only and does not take into account the objectives, financial situation or need of any particular person and is not intended to provide, and should not be relied on for financial product, tax, legal or accounting advice. Therefore, before making any decision, you should consider the information with regard to those matters and consult your own financial product, tax, legal and accounting advisors before engaging in or considering the appropriateness of any transaction.

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