Most Australian small business owners are at risk of ruin because of ill-fitting insurance, according to a recent report by QBE.

The survey has revealed shocking statistics into the reality of SMEs with close to 90% believing that a liability claim is potentially enough to put them out of business. 33% admitted that if faced with a claim, they would have to finance the costs out of their own pockets.

Sitting ducks

Despite the alarming rate, many business owners are still unconcerned about claims that could be made against them, or that they would ever need to make a claim themselves. Aaron Gavin, QBE General Manager, Small to Medium Enterprises, says that many tend to turn a blind eye to the risks threatening their business and the consequences if these what-ifs become reality.

According to the data, the top five claims with the biggest financial impact on small businesses are usually related to injury to labour hire personnel, injury to third party worker, electrocution, fire, and defamation and slander. The others on this list include trapped by machinery or equipment, physical assault or injury, faulty product, slip and fall injury, and impact by object injury. Businesses with the highest claiming sectors are roofing services, plumbing, laundries and drycleaners, automotive repairs and services, and automotive fuel retailing.

The risk of underinsurance

The survey, participated by 600 SMEs, also showed that over 60% of business owners are aware they aren’t covered by a suitable insurance plan. While many in this category understand the need for liability cover, it is often the main items of day-to-day business that become a priority, like building and equipment. For everything else that’s not at the top of the list, it can easily be overlooked when purchasing a policy, resulting in underinsurance.

For many SMEs, the fine line between staying in business and going out of business is determined by the level of insurance cover. Gavin has observed plenty of similar examples where a business is able to restore the premise and get cover for liability claims, but because operations and cash flow were impacted, the business ultimately lost clients and went under.

Brokers know best

The role of the industry expert in this matter is also being neglected, with only 14.6% seeking advice from an insurance broker. More than half (51.6%) turn to their accountant financial advisor about insuring their business, 40.2% rely on the Internet for solutions, and 23.8% turn to recommendations from family or friends.

While it can be good to compare the market, the information obtained is usually very general and not particularly applicable to all SMEs. Speaking to a broker who knows the ins and outs of the insurance market will not only guarantee you a policy that looks after your best interest, but it also means getting swiftly back on your feet after a claim.

You can’t put a price on peace of mind, and the one thing you don’t need to stress about is your business insurance. We are here to make sure you have the appropriate insurance cover to protect what you’ve worked so hard for, so speak to our team today.

P: 1800 809 132

Important Note: All insurance policies have exclusions. Please refer to the Product Disclosure Statement or Policy Wording to decide whether an insurance policy meets your needs.

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Born in 1984 as a general insurance brokerage, we can provide bespoke insurance advice to anyone in the general public within Australia. Our clients are primarily decision-makers in small, medium, and large businesses from various industries, including transport, earthmoving, and professional advisors.