The Insurance Council of Australia has urged the federal government to improve risk education for SMEs as extreme weather, inflation and regulatory complexity make cover more expensive.

It has lodged submissions on cyber, business interruption and workers’ compensation to a parliamentary joint committee inquiry into small business insurance.

Public liability and professional indemnity insurance submissions are also planned.

“Small business would benefit from a program that helps them understand how insurance markets work and what actions can be taken to reduce risk and improve insurability,” one ICA submission says.

“An education program could provide resources to assist with this learning and be delivered in partnership with a relevant industry association or other trusted intermediates who understand a business’ risk profile.”

ICA’s cyber submission says small businesses are particularly exposed to the rise in automated, AI-driven attacks, yet SME take-up of cyber cover remains low.  

It wants access to data from Australia’s unique mandatory ransomware reporting framework.

“We encourage the government to explore how information collected on Australia’s cyber risk ... can be shared with insurers and other parts of the cybersecurity ecosystem to improve Australia’s collective cybersecurity.”

The industrial special risks and BI submission says a 40% surge in construction costs since 2020 is driving underinsurance, and government-funded risk education could help reduce exposure, particularly in high-risk regions.

The workers’ compensation submission says psychological injury claims cost more than three times physical ones and require five times longer off work.  

Governments should invest in mental health prevention and harmonise rules across jurisdictions, it says.

Among the many ICA recommendations are a review of eligibility rules and thresholds for psychological injuries, clearer causation tests and better-defined psychosocial hazard frameworks.

ICA also calls for more consistent premium-setting frameworks, return to work requirements and coverage rules.  

It wants shortages of psychologists and psychiatrists addressed; digital care; specialised training and retention incentives, and mentoring for case managers; and government subsidies for workplace job redesign, supervision and modifications.  

“These submissions set out a road map for practical reforms, from tax relief to better risk education, that can ease costs on small business without compromising protections,” ICA CEO Andrew Hall said.

ICA adds changing attitudes to personal responsibility have led to an increase in claim severity – known as “social inflation”.  

Higher compensation, aggressive legal strategies and “courts broadening liability beyond original policy intent” have all contributed to higher insurance costs.

The National Insurance Brokers Association is preparing a submission to the inquiry. Broker feedback can be made here.

From the latest Insurance News magazine: How "zero progress" on insurance affordability is spurring some levels of government to radical action