Insurance

Rising cost of small business insurance

Emily Carter — Mon, 12 Aug 2024 23:51:02 +0000

Rising cost of small business insurance Emily Carter Tue, 08/13/2024 - 09:51

12 August 2024

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Eddie Williams.

ABC Radio South-East NSW

Subject: rising cost of small business insurance

Eddie Williams

Insurance is one of the biggest upfront costs for small businesses and over the last few years it seems like that cost has only been going up. A parliamentary inquiry is looking into the impact of climate risk on insurance premiums, not only impacting homeowners and property owners, but small business as well. Since the black summer fires, insurers have paid out nearly $17 billion in natural disaster claims across the country. Bruce Billson is the Australian �Թ�� and Family Enterprise Ombudsman and has made a submission to this inquiry.

Bruce Billson, good morning. How much of an impact are insurance costs having on small business at the moment?

Bruce Billson

Eddie, good to be with you and your listeners. It's having an enormous impact in that we've seen, particularly in New South Wales, when small businesses are asked what are their biggest pressure points for input costs – we understand them as cost-of-living pressures in households, these are business input costs for businesses – they’re citing insurance quite regularly and quite consistently. There's a couple of reasons for that. One, you touched on the simple maths, which is insurers are paying out a lot of a lot of money and they're looking to recover those funds and provision for future events with the premiums themselves and the pricing of them. There's a hardening in the insurance market. So, the appetite for insurers to come into Australia, and even for reinsurers a long way away from our shores to sort of underwrite catastrophic events is really being challenged at the present time. But I suppose the other point too, which is a little bit different from households, not that I would recommend people under insure or self-insure or choose other options. That's not an option available to most businesses, Eddie. They've got to have certain insurances to meet licensing requirements, obligations that they have to have in place so they can engage in trade or commerce. So they can't really get away from it and that's where it's really causing a great deal of pain for small and family businesses, particularly in your listening region.

Eddie Williams

And in this region which has experienced the worst of fire also flooding in recent years as well. How resilient are small businesses? How do they go in that recovery from disasters?

Bruce Billson

We've done a lot of work on this and, interestingly, only about one-in-four have an up-to-date continuity plan to deal with an event that really knocks their business off course. You know, it may be a natural disaster. It may be some event that surrounds a region that really impacts on the economy. Or it might be something that happens to the person that brings in the money, the core of the business, a health event for them. All of those things can really knock the business off track. Yet so few actually have what's called a business continuity plan. And those plans think about things not going the way you hope for, and what would you do about them. Do you have insurance? Do you have the kind of data that you know if your property is taken out by a natural disaster, that you can reach for key contact numbers? Do you have your business systems and invoicing and accounts in the cloud so that you can recover and get yourself back in shape?

And what we found was the better prepared people are clearly their prospects for recovery are improved. But it's not front of mind, and right now with 46% of businesses not making a profit, they're just trying to keep the lights on Eddie and trying to keep a pulse in the business. So some of these issues around planning and the business of running the business is probably not as front of mind for some and then when there's a disaster looming, it's action stations everywhere and that sometimes is not the time to be really planning for those sorts of events. You're really just prepping for something coming your way and hoping it's not catastrophic.

So it's really challenging at that level when it’s a tight-margin, not a lot of huge profits around, lots of other pressures in the economy, lots of headwinds facing small and family businesses. And then fold in the concern around an event really taking the business out or knocking it off course, and the cost pressures involved in having proper and appropriate insurance.

Eddie Williams

On ABC South-East, and you're hearing from the Australian �Թ�� and Family Enterprise Ombudsman, Bruce Billson, on issues when it comes to insurance and disaster resilience for small business. There's something elsewhere in the country - the Cyclone Reinsurance Pool. You've suggested expanding that to include other disasters like fire and flood. In simple terms, how does it work? And how would it work?

Bruce Billson

The government's involved itself in the north of the country, and understandably so. Where there's a catastrophic event, a cyclone, those numbers that are paid out by insurers are eye-watering. They are enormous sums of money, because there's vast areas that are impacted, and the sums involved are very significant where property and assets are taken out.

What's happened after a series of cyclones in the north of Australia, insurers are saying, ‘Yeah, nah, I don't think we want to insure people up in this part of the world because of these natural disasters.’ So the government said, look, we just can't leave people to defend for themselves without any kind of insurance cover. What is needed to bring insurers back into the marketplace? And what was identified was this reinsurance pool.

So, imagine you and I are insurers. We go insure some properties down at Merimbula. Something terrible happens, it's an enormous sum of money for you and I. We as insurers then can insure against that happening, and then go and transfer some of the risk onto a reinsurance pool that steps in when those numbers are really eye-watering, and they risk bringing down our insurance arrangements, or impacting on whether we want to insure those properties in the first place, if that makes sense Eddie. So, it's like a second step in insurance for the insurers themselves to guard against really, really big claims being made. And that's what a reinsurance pool does.

That logic makes sense in Northern Australia for a range of reasons, but those reasons are starting to appear in other regions, and we should turn our mind to whether that's a mechanism to make sure businesses and households in, say the Bega Valley, have multiple options of insurers. Get some competition happening because people know that they have a reinsurance pool that's sitting behind them in the event that a really catastrophic event occurs.

And this is an example that's happened in the UK. There's parts of the UK you've seen those lifestyle TV shows, Eddie, I'm sure you're loving those if you listening to Boz Scaggs, where you can get on a canal and boat your way around. And clearly, those areas are subject to inundation by floods. And with the impact of climate change and more severe weather events, you're seeing those floods really impacting on those regions. And insurers saying, maybe this is a place where we don't want to insure properties. In the UK example, the UK government got involved and created a reinsurance pool called Flood Re, and Flood Re was there to back up those insurers in those regions in the event of a really catastrophic disaster.

Eddie Williams

Very, very briefly, consumer protections. Are they strong enough? Are there any for small business when they're dealing with insurance?

Bruce Billson

Well, the thing is, knowing exactly what's covered. This is the problem. For a lot of people, time-poor small businesses, insurance can be a pay it once, set and forget, move on with your life. But as we've seen so many times, Eddie, you pay for something called business interruption insurance, your business is comprehensively interrupted by an event, and then you're told, Oh, hang on, in the fine print, that's not covered. So that's not good enough. We're arguing for a simplification, a clarity around what kind of cover is available so people can make better and informed decisions. And then encourage people to stay close to their insurance so they know what's going on. They know what is covered, and they also know what they can do to improve their the risk so they mitigate risk, make themselves more attractive to insurers, and then hopefully have improved accessibility and affordability of that cover.

Eddie Williams

Bruce Billson, thanks very much for your time this morning.

Bruce Billson

Good to be with you. Take care.

Excessive insurance premiums are killing small businesses

Olivia Pearce — Thu, 01 Aug 2024 23:06:57 +0000

Excessive insurance premiums are killing small businesses Olivia Pearce Fri, 08/02/2024 - 09:06

04 March 2024

Originally published in the Canberra Times.

Finding adequate insurance cover at commercially viable terms is fast becoming a wicked challenge for small and family businesses.

There have been countless examples of small businesses closing down because they either can't get the insurance they need, or when it is available, they can't afford the prohibitively ridiculous premiums on offer, which in some cases have risen by 200 or 300 per cent.

Eye-watering excesses and a growing list of exclusions often accompany 'take it or leave it' insurance products that in some case undermine the business's ability to operate with any hope of being viable.

We saw this recently with a play centre that was told it would only get insurance at a very expensive price with behemoth excesses if it ditched its ninja obstacle course - its biggest earner. Despite having no claims, a well-developed risk management system, active supervision and monitoring and the help of an experienced broker, there was no insurer 'appetite' to cover this activity. The business was forced to close and the jobs, service to the community and resulting economic activity were lost.

Unlike households who - for many reasons - might choose to be uninsured or underinsured and have options about the level and nature of the risk protection policies they subscribe to, a small business must have insurance covering areas such as public liability.

If a small business isn't insured, it cannot engage in trade and commerce.

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.

In sectors, such as amusement, leisure and recreation, the insurance crisis is so dire we were asked to look at an alternative model, known as a Discretionary Mutual Fund.

Our initial report called The Show Must Go On and subsequent further research and reports backed the creation of a DMF to prevent forced business closures, job losses and a reduction in activity that is important to livelihoods and communities, particularly in regional Australia.

Crucially, a DMF would be able to impose conditions of entry standards for members and enforce strong risk-management culture and procedures, reducing the likelihood of accidents.

Two years on, it is disappointing our major recommendations, including initial government support to set up a DMF, have not been embraced.

Over summer we've seen floods, storms and bushfires devastate some small businesses. The insurance sector can do more to be clear about what is and is not covered when a disaster hits a small business. Despite the reassuring advertising, complaints to regulators about claims being denied and a lack of responsiveness by insurers remain high.

We are already hearing complaints about insurance companies still holding up claims from terrible floods last year and a federal parliamentary inquiry is examining the response. Typically, these claims are mainly related to property, public liability and business interruption issues.

Two years ago, we conducted an inquiry into �Թ�� Natural Disaster Preparedness and Resilience which found insurers were uninterested in the steps individual small and family businesses take to mitigate disaster risk, or dismissive of them. It had zero impact on the availability and the pricing of their premiums as insurers say they look at risk across a community-wide or industry-wide basis.

It's frustrating many small, family and farming businesses are individually doing what's being asked of them but are seeing no upside to pricing premiums and availability and affordability of insurance cover.

With so many people now working from home, these home-based businesses need to check in with their insurer to make sure they are not on the wrong side of their cover.

Does their household insurance policy cover the two or three Harley Davidsons a business might be repairing in the home garage, if it caught on fire?

Is the business and customer protected if a patron slips on a wet floor and is injured at a home salon? And just how many assistants can you have in your home office helping with your digital media business or chooks producing eggs for roadside sale before your home base starts to not look like a 'household' by insurers?

This is all about important communication a business should have with their insurers and brokers, but it has to be both ways.

The insurance sector has explained the problem is a global one, described as a hardening of the market which means capital is scarce, reinsurance is difficult to obtain and risk appetites are low. In its 2022 annual report the Insurance Council of Australia indicated it would be a priority to address the availability and affordability of insurance.

More than a year ago, the regulator APRA urged the insurance industry to invest in "simplification across products, systems and processes".

For small businesses, insurance, while always vital business precondition, is no longer a once-a-year payment (with a likely inevitable modest price increase) that could be quickly sorted and the business owner could move on to the many other responsibilities of running a business.

It now requires active engagement, close attention to risks and their management, often data collection and collaboration with a specialist broker to navigate this 'hardened market' to source the cover that is needed, and a hefty uplift in cost even the Reserve Bank has called out as quite extraordinary.

And yet, still too many small businesses are not able to access and afford the insurance they need.

I'm pleading with the insurance sector to help small business by mapping out pathways to solutions to give small business the chance to stay in business. Urgent and decisive action is needed to ensure essential insurances for small businesses are understandable, accessible and affordable.

TRANSCRIPT: Small business insurance crisis

Emily Carter — Tue, 05 Mar 2024 03:48:25 +0000

TRANSCRIPT: Small business insurance crisis Emily Carter Tue, 03/05/2024 - 14:48

04 March 2024

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Leon Delaney.

Radio 2CC Canberra

Leon Delaney

The Australian �Թ�� and Family Enterprise Ombudsman has written today that excessive insurance premiums are causing significant harm to small businesses. Bruce Billson, good afternoon.

Bruce Billson

Leon, great to be with you and your listeners on this glorious capital day.

Leon Delaney

It's a beautiful day today, isn't it? It's absolutely a cracker. Now I've got to say, not only are excessive insurance premiums causing significant harm to small businesses, I think it's hurting families too, Bruce.

Bruce Billson

Absolutely. I stick pretty close to my lane, Leon, and I know lots of others are talking about consumer insurance challenges and pressures households are facing. I was just keen to make sure that the plight of small and family businesses was in that frame as well. Unlike some families that may choose, in some cases courageously choose, to under-insured and perhaps worryingly not insure at all because of the financial pressures they face, for a small business you don't actually have that option. In almost all respects, if you don't have the essential insurances that your license or the nature of your business requires, you can't engage in trade and commerce at all. So, it's one of those things that that's unavoidable. And those price rises, that tightening, that hardening of the market, is really presenting some enormous challenges for our small business men and women.

Leon Delaney

I know there’s an inquiry underway at the moment into insurance across the board, but more specifically in relation to recent natural disasters. But we've seen really quite steep increases in premiums, particularly in the last 12 months. Do you reckon they're all properly explained by those natural disasters or is there something else going on there?

Bruce Billson

Look, there's a couple of things going on. I mean, there's what's called a hardening of the market. This is where the insurance companies, the underwriters, those people that, you know, basically bankroll the insurance industry around the globe are having a hard look. There's been a spate of natural disasters that have had very significant claims attributed to them, and that's seen pressure in some quarters.

In other areas I think at times the underwriters, they can often be Lloyd's syndicates over on the other side of the world. We're a long way away and probably in some people's eyes not a really big market, and people are thinking there’s lots going on in Australia that I don't understand, maybe I invest my funds in Spain or something closer to home.

So, there's all those things happening. And in some areas when you look at claims being paid out for insurance premiums paid, there have been some years of losses. But it's not just this year, the small business men and women I talk with have been pointing to year-on-year increases. It's noteworthy even the Reserve Bank governor was pointing to insurance costs being a real driver.

Leon Delaney

Okay, hold your horses. Bruce, I wanted to jump on that bandwagon the moment Michele Bullock made those remarks about going to the hairdresser and buying insurance. And I thought, okay, sure going to the hairdresser might be discretionary, might be, but you do need to look your best. But insurance, we have no choice. They've literally got us over a barrel. If we don't buy the insurance, we're unprotected, we're vulnerable.

Bruce Billson

And I'll take that as a comment Leon. It's not a choice that almost all businesses can exercise. They have to have it. Now, what we're seeing is in response to this hardening of the market and, you know, I think the jargon is a ‘rebalancing of their risk profile’ and these sorts of things. You're seeing premiums up, excesses - the amount you pay before you can make the claim - they have gone up in some eye watering examples. And then you see what's excluded. Certain things that they'll no longer insure. And we've seen examples of that at entertainment centres all the way through to caravan parks where the bouncing pillows are a terrifying insurance risk. And even in rural and regional New South Wales and beyond, even those traditional pubs, they might be weatherboard, they might not have had a claim for very, very, very many years, are also seeing enormous increases.

What we also need to point out, and you've touched on with the hairdressing example - bit close to home Leon with my diminished follicle activity - we're seeing through COVID and other changes where a skilled hairdresser might think I'm not going to work in a salon now. I might convert my garage or set up a salon at home and run a home-based business. And we've also seen some examples where insurers have said, look, hang on a minute. Is this really the peaceful enjoyment of a household or is there something else going on? So that's another area where I'm urging people to talk with their brokers, talk with their insurers, to understand exactly what they're covered for and what they're not, and then understand the risks that that entails.

Leon Delaney

I took particular umbrage at Michele Bullock though because insurance premiums, these are not price rises that are demand driven. They haven't put the prices up because all we're all rushing to buy insurance because it's fashionable. We buy the insurance we need, no more and hopefully no less. I know it’s not your field of expertise, but to suggest that we're somehow responsible for driving up inflation because we actually took out an insurance premium, I thought that was pretty rough.

Bruce Billson

Look, I didn't quite read the remarks that way. I saw it as a non-discretionary expenditure, particularly for businessmen and women. And it might not just be asset protection. I mean, we've seen this in professional indemnity where, you know, a profession is maybe checking some plans or providing advice to a bank, and when something doesn't go right, those bigger firms think, quick, who can we go after to get some money back through professional indemnity cover.

Also, public liability, where something might go wrong. We've got a particular challenge there with the amount of claims and the value of them, picking up some attributes that haven't been there in the past. There's a lot of moving parts.

My point was, let's not lose sight of the fact if you don't have these insurances, you can't open your door as a small business and that there may be a need to think more creatively. And we've mentioned the Discretionary Mutual Fund as an example, to make sure that the protection is there that the business and their customers need and deserve.

Leon Delaney

Well, I was going to ask you, Bruce, and you've opened the door for me. Is there a better way?

Bruce Billson

Well, that's a different way. A Discretionary Mutual Fund is almost like a group self-insure scheme. We see them in some parts of the Australian economy now, but they're very well established internationally where a group of like businesses with a similar risk get together and think what can we do to make sure we manage and mitigate and reduce our risks, accumulate a pool of funds to pay legitimate claims, but also work together to reduce the likelihood and the cost of any claims.

That's a model we thought had some real value when we were thinking about what was happening to rural shows and the like, where, you know, a lot of the showies were struggling to get insurance for certain activities. And in other parts of the economy where that self-help, self-management, self-risk reduction in a shared self-insurance pool might well be an answer for the challenges that are being faced right now.

Leon Delaney

Okay. You've issued a call for the insurance sector to do their bit to help small business. What can the insurance businesses do and what should they do? Bearing in mind that their primary motivation is to make as much profit as they possibly can?

Bruce Billson

Well, I think there's three things they can do, and we've seen some examples of this already.

Now, your listeners might not have ever thought about this, but when people are out there doing fire reduction burns, those professionals doing them need insurance. Now, insurers were saying, hang on a minute, what if one of these get away? What's the likely risk exposure and costs here? So, they got together with the insurers and said, what are you worried about that's pushing prices up? What can we do to reassure you about our risk management practices? And together, what can we do to make sure that you're not exposed excessively, and we can actually get affordable insurance?

That model, I think, is a good one, where the insurance industry is sharing what they know and what worries them and what's driving the price increases and then getting alongside the small business community, often through their industry associations, to come up with a shared game plan. I think that's number one.

Number two, be frank and clear on what policies cover what. We've seen a lot of discussion around business interruption insurance and then finding the things that people thought were insured actually aren't. So, a simpler, clearer articulation of what's covered. And that's something we've seen the Productivity Commission and others talk about.

And three, think about these innovations that we see overseas. The Discretionary Mutual Fund, a collective self-insurance model, could well benefit from reinsurance through the formal and structured insurance sector to work hand in glove with each other. So, there's three ideas, Leon.

Leon Delaney

Well, thank you so much, but it's probably not me that should be listening to your suggestions. It's probably the insurance companies of the world, and hopefully they do pay some attention. Bruce, thanks once again for chatting today.

The small business insurance crisis

Olivia Pearce — Mon, 15 Jan 2024 00:16:23 +0000

The small business insurance crisis Olivia Pearce Mon, 01/15/2024 - 11:16

10 January 2024

Originally published in Kochies Business Builder.

Many small and family businesses say their biggest and most pressing cost pressure is not wages, energy or even landlords putting up the rent; it’s insurance, writes �Թ�� and Family Enterprise Ombudsman Bruce Billson.

Finding adequate insurance cover at commercially viable terms is fast becoming a wicked challenge that is, sadly, in too many cases, forcing small businesses out of business.

Unlike households who – for many reasons – might choose to be uninsured or under-insured and have options about the level and nature of the risk protection policies they subscribe to, a small business must have insurance covering areas such as public liability.

If a small business isn’t insured, it cannot engage in trade and commerce.

Insurance an increasing issue for small businesses

There have been countless examples of small businesses closing down because they either can’t get the insurance they need, or when it is available, they can’t afford the prohibitively ridiculous premiums on offer, which in some cases have risen by 200 per cent. Eye-watering excesses and a growing list of exclusions often accompany ‘take it or leave it’ insurance products.

Just recently, our office was contacted by an indoor gym and rock climbing business in Western Australia that closed its doors after it was no longer able to buy appropriate liability insurance cover.

In the amusement, leisure and recreation sector, the insurance crisis is so dire that we were asked to look at an alternative model, known as a Discretionary Mutual Fund.

Why a Discretionary Mutual Fund is needed

Our report called The Show Must Go On and subsequent further research and reports backed the creation of a DMF to prevent forced closures, job losses, and a reduction in activity that is important to livelihoods and communities, particularly in the regions.

Crucially, a DMF would be able to impose conditions of entry standards for members and enforce strong risk-management culture and procedures, reducing the likelihood of accidents.

Two years on, it is disappointing that our major recommendations, including initial government support to set up a DMF, have not been embraced.

We’re currently seeing floods and storms devastate some small businesses. The insurance sector can do more to be clear about what is and is not covered. Despite reassuring advertising, complaints to regulators about claims being denied and a lack of responsiveness by insurers remain high.

There was a rise in the number of insurance issues after the 2020 bushfires, mainly regarding property and related public liability insurance policies, and again as a result of COVID owing to business interruption issues.

Small business and natural disasters

In 2022, we conducted an inquiry into �Թ�� Natural Disaster Preparedness and Resilience which found that many businesses cannot secure appropriate insurance at an affordable price. If they can get insurance, it can come with excesses that would preclude any claim ever being made.

Frustratingly, insurers are also uninterested in the steps individual small and family businesses take to mitigate disaster risk, or dismissive of them. We have examples of individual businesses doing everything they can possibly do but it has zero impact on the availability and the pricing of their premiums.

We’re told this is because the insurance companies look at risk across a broader pool – it is community-wide or industry-wide or neighbourhood-wide analysis. Yet the narrative, again amplified through advertising, is often about what individuals might do.

Well, many small and family businesses are individually doing what’s being asked of them but are seeing no upside to pricing premiums and availability and affordability of insurance cover. What might be for some an insurance ‘gap’ is too often a ‘gorge’ for small business that too many can’t cross.

A global insurance crisis

More than a year ago, the regulator APRA urged the insurance industry to invest in ‘simplification across products, systems and processes’.

Now, I’m pleading with the insurance sector to help small businesses by mapping out pathways to solutions to give small business owners the chance to stay in business. Urgent and decisive action is needed to ensure that essential insurance for small businesses are understandable, accessible and affordable.

Storm clouds to clear for Northern Australian small businesses

admin — Fri, 10 Dec 2021 03:53:37 +0000

Storm clouds to clear for Northern Australian small businesses admin Fri, 12/10/2021 - 14:53

04 May 2021

The Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson says insurance premiums will be more affordable for small businesses in Northern Australia, under a new Federal Government scheme to launch next year.

Mr Billson welcomed plans for a reinsurance pool to be backed by a $10 billion Federal Government guarantee to cover cyclone and flood damage across Northern Australia from July 1, 2022.

He says the scheme, which is broadly in line with a recommendation in ASBFEO’s Insurance Inquiry, will make a significant difference.

“This is certainly a welcome step in the right direction when it comes to ensuring essential insurance coverage is accessible to small businesses,” Mr Billson says.

“Our Insurance Inquiry revealed that small businesses have been crippled by rising insurance costs and some can’t get it at all.

“A reinsurance pool will go some way to addressing this key barrier for small businesses in Northern Australia.”

Mr Billson says he also recognises barriers still exist for SME insurance coverage in other parts of Australia.

“In the course of our Insurance Inquiry, we spoke to over 800 small businesses – about 12% of those were from Northern Australia,” Mr Billson says.

“That means there are still many small businesses out there experiencing difficulties with accessing necessary insurance coverage.

“My office is ready and willing to work collaboratively with the government, relevant agencies and the insurance industry towards making essential insurance products affordable and accessible for small businesses across the country.

“Ultimately insurance is a necessity for small businesses to operate, which is why it is vital these products are accessible so they are protected when things go wrong.”

Ombudsman launches Review of Discretionary Mutual Fund proposal

admin — Fri, 10 Dec 2021 03:10:58 +0000

Ombudsman launches Review of Discretionary Mutual Fund proposal admin Fri, 12/10/2021 - 14:10

04 June 2021

The Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson has today launched a Review of the Discretionary Mutual Fund proposed for small businesses in the amusement, leisure and recreation sector unable to secure essential insurance coverage.

Mr Billson says the self-generated review, will build on ASBFEO’s Insurance Inquiry as well as ongoing feedback from the Australian Amusement, Leisure and Recreation Association (AALARA) on behalf of its members – many of which face imminent closure without adequate insurance coverage.

“Our country shows that we all love so much are facing a bleak future because small businesses, such as ride-operators, cannot get insurance coverage,” Mr Billson says.

“Closure of these small businesses will mean significant job losses and hurt local economies.

“Our Review will be a deep dive into the inaccessibility of insurance for amusement, leisure and recreation businesses, so that we can provide further advice to the Australian Government on what measures could help these small businesses secure the insurance products needed to remain in operation.

“At the core of this Review, my office will independently examine AALARA’s proposal to establish an industry-owned and operated Discretionary Mutual Fund as the most effective and durable solution to the sector’s insurance crisis.

“We will consider if this proposal will resolve the insurance issues in the sector, the responsibilities and obligations it would impose, its adequacy in satisfying regulatory requirements as well as other options that may assist these businesses.”

“This Review will use the Ombudsman’s internal expertise and seek external expert advice on complex issues, such as specialist legal, financial sustainability and actuarial matters.”

AALARA President Shane McGrath welcomed ASBFEO’s Review of its proposed Discretionary Mutual Fund, which it is seeking to establish in partnership with Aon.

“The amusement, attractions, leisure and recreation industries are facing catastrophic consequences without necessary insurance coverage,” Mr McGrath says.

“ASBFEO’s Review will provide vital information to the Australian Government about the challenges our members are up against regarding insurance accessibility, as well as what that means for these businesses and what support could help address insurance issues faced by the sector.”

A final report is expected to be completed in August.

Ombudsman’s report says the show must go on

admin — Fri, 10 Dec 2021 02:32:57 +0000

Ombudsman’s report says the show must go on admin Fri, 12/10/2021 - 13:32

20 October 2021

The Australian �Թ�� and Family Enterprise Ombudsman, Bruce Billson, has today released an interim report into the insurance crisis facing Australia’s amusement, leisure, and recreation sector.

“There is a clear and present danger facing the amusement and recreation sector because an inability for these businesses to get insurance cover means that many of the attractions people know and love won’t be able to operate,” Mr Billson said.

“The lack of insurance coverage could lead to the closure of businesses in the amusement and leisure sector, significant job losses (particularly in regional areas), stranded assets and loss of economic activity generated by metro and regional shows and amusement parks.”

The report, The Show Must Go On, explores whether a Discretionary Mutual Fund (DMF) can be a durable solution and discusses required legislative reform by states and territories to ensure it is ‘fit for purpose’. It also highlights the need for DMF to be recognised and accepted as a suitable solution by councils and showground managers.

Mr Billson said the interim report seeks urgent feedback from all stakeholders by 3 November to the ideas and questions raised in the report.

“We are calling for submissions from those in the industry so we can further understand any issues before we release a final report to government,” Mr Billson said.

“As businesses look to re-open after lockdowns, this issue is a shattering blow for those small and family businesses in the amusement, leisure and recreation sector which will be forced to stay shut because they can’t get insurance.

“There is a very real possibility shows won’t go on - something has to be done for the show to go on. A DMF may represent the only workable solution.”

The ASBFEO has been reviewing a proposal by the Australian Amusement, Leisure and Recreation Association (AALARA) to establish a DMF as a solution to the critical and immediate need for insurance in the sector.

The interim report found the lack of affordable insurance was not the fault of the amusement industry but due to a “hardening” in the global insurance market. Very few insurers are willing to insure the industry, and premiums – when available – had risen by as much as 200 per cent.

“In many instances the policy is priced such that it may as well not exist because small operators have no capacity to pay for the cover they need to continue operating,” the report says.

“In the case of the amusement, leisure and recreation sector, there isn’t an offering that provides full coverage.”

Public liability insurance coverage is a legal requirement for the operation of rides at showgrounds and fixed installations, both through contractual obligations and obligations imposed on councils and other landowners by state and territory governments.

DMFs operate to provide cover on a discretionary basis to a group of individuals or organisations that have a similar risk profile. Under a DMF, members who meet requirements would have access to a certificate of protection, enabling them to operate these amusement rides.

The Show Must Go On interim report and overview and Submissions should be sent to: inquiries@asbfeo.gov.au by COB 3 November 2021.

Media contact: 0448 467 178

Case studies available on request

Ombudsman’s final report finds ‘Show Must Go On’ despite insurance crisis

admin — Fri, 10 Dec 2021 02:04:03 +0000

Ombudsman’s final report finds ‘Show Must Go On’ despite insurance crisis admin Fri, 12/10/2021 - 13:04

06 December 2021

The Australian �Թ�� and Family Enterprise Ombudsman, Bruce Billson, has today released the final report into the insurance crisis facing Australia’s amusement, leisure, and recreation sector, declaring “the show must go on”.

The report, The Show Must Go On, finds a Discretionary Mutual Fund (DMF) is the most practical and durable solution to enable the amusement, leisure and recreation sector to remain operational in a hardened global insurance market.

“Right now, there is a very real possibility the show cannot go on if small businesses in the amusement and recreation sector cannot get the essential risk protection they need to operate,” Mr Billson says.

“This inability to secure insurance coverage puts thousands of jobs at risk and means many of the attractions people know and love are on the brink of being a thing of the past.

“The clear and present danger is real. To put it into perspective, the sector employs over 7,000 people and contributes $1.84 billion to the economy in total.

“If these businesses cannot secure risk protection, they face imminent closure and that will lead to significant job losses (particularly in regional areas) and a loss of economic activity generated by metro and regional shows and amusement parks.

“In this light, our final report endorses the Australian Amusement, Leisure and Recreation Association’s (AALARA) proposal to establish a DMF as the only current workable solution to the immediate need for coverage in the sector.”

The Show Must Go On final report, reiterates the interim report’s finding that the lack of affordable insurance arises from a range of factors amplified by the hardening global insurance market which means very few insurers are willing to cover the industry and premiums – when available – have skyrocketed.

“With only one insurer willing to provide coverage to these businesses, insurance premiums have risen - often by more than 200% - and many businesses have been refused coverage outright,” Mr Billson says.

“Others have stranded assets, with just some of their equipment securing insurance coverage.”

Public liability insurance coverage is legally required across a range of businesses including rides at showgrounds, kids play centres, laser tag and even walking tours in national parks. This can be through contractual obligations as well as requirements imposed by State and Territory Governments on councils and other landowners.

The ASBFEO recommends the establishment of a DMF as a workable and durable solution for the industry, however the final report also finds this is reliant on foundational support by all levels of government.

“A DMF requires legislative reform by all states and territories to ensure it is accepted in lieu of insurance for licensing requirements,” Mr Billson says.

“Additionally, the DMF needs to be recognised as a suitable solution at a local level and supported by councils and showground managers.”

While the Ombudsman’s final report confirms a DMF as the most suitable solution to the insurance crisis faced by the sector, it also acknowledges there are challenges to the model.

“A DMF is not a magic fix,” Mr Billson says.

“It requires an ongoing sector-wide commitment to best practice risk mitigation measures, the need to ensure membership remains cohesive and acts in the best interests of other members and broad understanding the sector is unlikely to see coverage costs reduce in the short term.

“On balance, as the insurance crisis threatens the livelihoods of thousands of hard-working Australian small business owners along with many of the family entertainment activities that we hold dear, a DMF is the only suitable pathway forward.”

The Show Must Go On final report and overview