Amanda Whiting, Executive General Manager for CGU’s Small to Medium Enterprise Division, herself once a small business owner, has recently shared five insights in small businesses and insurance on CGU’s blog.
The many hats of small business owners
Having been a small business owner with her husband for numerous years in the hospitality sector, Whiting notes the benefits of being their own boss, better work-life flexibility but also the increase in responsibility for a wide range of roles within the business “…you are the IT manager, HR manager, sales manager – not to mention being responsible for managing your accounts, legal responsibilities and having the right insurance”, she says.
Whiting’s experiences lend themselves well to understanding the opportunities and challenges for small businesses in her role now with CGU.
CGU is backed by Australia’s largest insurer, IAG and its insights across the SME landscape show that:
1. Nearly 40 per cent of Australian small businesses haven’t updated their insurance for buildings, stock or contents in the past year.
Small business owners are putting themselves at risk by failing to do an annual review of their building, stock and contents insurance.
The cost to replace and repair business assets fluctuates each year, and in some areas the cost to replace a building has increased by more than double the consumer price index (CPI) in the past year due to building code changes and increased labour costs.
2. Less than a quarter of small businesses are not taking up business interruption insurance (despite this being one of the most expensive types of claims).
Australian small businesses continue to neglect this important cover, despite the average business interruption claim costing more than $20,000 – nearly as much as a liability claim.
Another trend Whiting notes is an increase in business interruption costs above CPI, attributing this to factors such as specialised machinery being more easily damaged, yet difficult to repair.
A business that is closed for only a few days may be at risk of losing their customer base to a competitor.
3. Of the 97 per cent of small businesses who have public and products liability cover, 45 per cent only have the basic minimum cover.
While the majority of small business owners understand the importance of insurance for liability claims, only 45 per cent have the basic minimum cover.
If a small business owner who has only taken out the minimum liability cover is hit with a large liability claim, they could have a multi-million dollar financial shortfall – which could be game over if you’re struggling with cashflow.
And the chances of a liability claim for a small business is real – especially in personal injury cases or where negligence causes significant property damage.
4. Nearly 50 per cent of SMEs recognise the importance of cyber insurance, but less than 10 per cent of small businesses have cover.
Nearly 50 per cent of small business owners recognise the increasing importance of cyber insurance and the rise in cyber threat, showing an increasing awareness of this risk.
However, less than 10 per cent of small businesses have purchased cyber insurance and have appropriate levels of cover for their business.
“You need to protect your customer’s data and I’m not sure that small businesses are aware of the risks in this space. Even simple things like offering free wi-fi in your café can carry unforeseen cyber risks to your business. It was a big learning curve for me,” Whiting adds.
As NIBA reported in May, cyber needs to be forefront of business owners as mandatory reporting requirements for data breaches will be coming into place in 2018 and may require businesses to take action.
5. One size doesn’t fit all
Amanda says that the level of sophistication around insurance is changing and we are seeing more bespoke coverage based on people’s needs.
“Just as there’s no such thing as a ‘one size fits all’ small business, there’s no such thing as a ‘one size fits all’ small business insurance policy. That’s why it’s important for small business owners to ensure they’re insurance needs are tailored to their business and their unique situation.”