An article from the Australian Financial Review (3 April, 2013) “Insurance Blind Spot for SMEs”, highlights a lack of awareness and preparedness amongst Australian SMEs when it comes to protecting their income through Business Interruption insurance.
Business Interruption insurance protects businesses from a loss of income, explains Ross Cameron, Cameron Research Managing Director. “If your place burnt to the ground, you have fire insurance, but if you can’t pay your rent or for example, you still have ongoing costs from one of your suppliers getting flooded which affects your income, that’s when business interruption comes in.”
A lack of education and financial understanding, combined with the time-poor nature of running a business are all contributing to SME owners leaving themselves exposed to risk. Unlike the ‘tangibility’ of property protection or liability cover, which are better understood, BI Insurance requires company owners and their brokers to understand how a potential broken link in their business chain could significantly impact income streams.
John Phillips, Chief Underwriting and Portfolio Manager of Commercial at Suncorp, says the essential insurance covers for SMEs includes fire, Liability, BI and Management Liability. “They’re four corners we believe every single small business should have, and unfortunately having BI is only one in two [among SMEs] – it’s not where it should be.”
A stark reminder for the need of adequate insurance came in the form of the Queensland floods earlier in the year, and the Tasmanian bushfires.
Data from the Insurance Council of Australia last month showed insurers received more than 65,000 claims and netted $674 million in insurance losses from natural catastrophes this summer to February. However, data from Roy Morgan showed that only one third of Queensland businesses had property cover, and only 14% held BI insurance.
Both accountants and brokers play an important role in the link between SMEs and their insurers Says Darren Maher of CGU. “Brokers play a critical role in helping the client to understand their risk and help them to purchase a product that best fits the risks they’re trying to address.” So, while Business Interruption insurance might be difficult to understand, industry experts argue that it’s one of the most vital forms of protection for businesses.
For advice on protecting your business, contact Whitbread Insurance Brokers on 1300 424 627.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.