‘The danger is real’: Ombudsman speaks on ‘insurance crisis’ facing small businesses

In the report released on Monday (6 December), Bruce Billson said small businesses in the sector are facing “imminent closure” unless they are provided with the essential risk protection they need.

“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,” Mr Billson said.

“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.”

The ASBFEO’s report has endorsed the Australian Amusement, Leisure and Recreation Association’s (AALARA) proposal to establish a discretionary mutual fund (DMF) – whichs provide cover to a group of individuals or organisations that have a similar risk profile – and found that the lack of affordable insurance, combined with a “hardening global insurance market” means few insurers are willing to cover the industry.

Adding to this, when premiums have become available they have often risen by over 200 per cent leaving businesses to be refused any coverage at all.

Mr Billson said while the establishment of a DMF is a practical solution to the crisis, it should not be considered a “magic fix”.

“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,” he said.

“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.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.