Innovation needed as mitigation offers ‘cold comfort’: Business NSW
Business NSW has called for the development of innovative insurance products that can deliver affordability and claim handling benefits, given slow-moving risk reduction reforms offer “cold comfort” for firms facing immediate cost and cover pressures.
A report titled Insurance at the Speed of Business says that while the group supports long-term measures such as increasing built environment resilience through mitigation and building codes, it will take years before those actions translate into relief.
“The insurance sector has also not committed to reducing premiums if these solutions were implemented, nor specified how much they expect premiums would drop,” the report says. “Businesses need solutions that can be implemented on a timetable meaningful to their operations - they need solutions that take effect in months, not decades.”
Slow-paced reforms offer “cold comfort” to businesses facing premium gains or uninsurability issues that will lead to them ceasing to operate long before any improvements are realised, it says.
Business NSW says standard insurance products are not capable of operating “at the speed of business” and current models with slow decision-making and rigid payout structures are failing to meet contemporary needs.
The report, which focuses on professional indemnity and public liability as well as property insurance in bushfire and flood-prone areas, makes nine recommendations.
The Australian Securities and Investments Commission should audit the insurance market model to ensure brokers give at least two quotes and adhere to a minimum standard in explaining the pros and cons of options, the NSW Government should audit its procurement processes to ensure insurance required is fit for purpose, and state and federal funding should be provided for insurance education, it says.
The report recommends that workshops determine customer interest in alternative products and that the NSW Government run an innovation market testing exercise.
It suggests establishing a business/government project team to develop products based on alternative product features, such as those characterised by discretionary mutual funds and parametric insurance.
Business and consumer representation should be part of the Federal Government’s Hazard Insurance Partnership and a permanent insurance working group across the Federal Government, states and territories should be created with a focus on innovation and premium reduction.
The report also presses the case for the removal of the Emergency Services Levy and stamp duty tax.
Business NSW identifies 63% of tourism businesses, 48% of hospitality businesses and 33% of transport businesses as uninsured or underinsured for public liability.
For professional indemnity, it observes 42% of construction businesses and 39% of professional services businesses being uninsured or underinsured.
“Uninsured businesses are vulnerable and their closure may result in bankruptcy, layoffs, legal problems and disrupted services - impacting both business owners and their customers,” Business NSW CEO Daniel Hunter said.
“The NSW Government needs to be commended for recently announced proposed changes to the Emergency Services Levy. But this is only one part of the puzzle.”
The Insurance Council of Australia (ICA) says it welcomes the report and many of the policy recommendations align with its advocacy work.
“Just last week, Business NSW and the ICA welcomed the NSW Government’s announcement to reform the Emergency Services Levy, to help lower the costs of insurance for home and business policyholders,” a spokesperson told insuranceNEWS.com.au.
“The ICA is committed to working with our industry partners and Government, to seek better outcomes for communities and businesses right across NSW.”