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Businesses forced to close as 'insurance crisis' worsens

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A growing number of businesses are being forced to shutter because they can’t get public liability insurance which is mandatory for many of the industries they operate in, according to Australian Small Business and Family Enterprise Ombudsman Kate Carnell.

Ms Carnell warns the exodus could increase if no action is taken to remedy the worsening “insurance crisis” that extends to other insurance products, including professional indemnity.

She says the situation facing businesses has deteriorated since she finished her insurance inquiry last year and released a report in December listing 15 proposals for the Government and stakeholders to consider.

“What we are seeing now is businesses actually closing,” Ms Carnell told insuranceNEWS.com.au today. “We are seeing the ramifications of businesses truly not being able to get the insurance products that they need to operate.

“If you can’t get [insurance], you’ve no choice but to close.”

Ms Carnell pressed the Government to act on the 15 proposals she made in the insurance inquiry report.

She says calls for statutory caps on liability for personal injury and creation of a no-fault National Injury Insurance Scheme will address the public liability insurance crunch facing many small businesses.

Statutory caps on liability introduced in New Zealand have proved effective and a similar setup for Australia should be given serious consideration.

“Our report recommends Australia follow the lead of New Zealand, which has applied statutory caps on liability for personal injury,” Ms Carnell said. “We need a civil liability framework that actually works.”

She says some in the insurance industry have voiced support for statutory caps on injury payouts and establishment of a no-fault injury insurance scheme.

“I’m not speaking for all of them but the feedback we had suggests they agree there need to be some changes,” Ms Carnell said.

The ombudsman’s pleas for urgent action came as she highlighted Barra Fun Park’s plight in Townsville, which announced it would be closing for good on Sunday. The owner was not able to renew the public liability insurance for his business.

The fun park has had only one claim during its 20 years of operation. The owner’s premiums subsequently nearly tripled, and the park was affected by COVID-19 restrictions for six months.

Ms Carnell says the owner’s unsuccessful effort to renew his public liability cover is not an isolated case.

“We know there are many small businesses, particularly those offering recreational activities such as caravan parks with splash zones and jumping pillows, that are in the same boat.

“Throughout our inquiry, hundreds of small businesses told my office they face closure if insurance remains unavailable to them.