Small business insurance premiums have risen by up to 60% since 2019, says the Insurance Council of Australia (ICA), which warns that outdated liability laws, ballooning legal costs and government red tape are pushing up costs.
In submissions to the Parliamentary Joint Committee’s inquiry into small business insurance, the ICA set out a reform agenda targeting cost drivers, including:
- A national review of liability laws to tackle claims cost pressures, including rising psychological injury and legal claims that flow directly through to premiums.
- Caps on legal costs and streamlined claims processes to stop legal fees consuming a disproportionate share of compensation payouts and to resolve claims faster.
- A national ban on claim farming, the practice of cold-calling or pressuring people into lodging injury claims, which inflates claims volumes and costs.
- Fairer government procurement rules so small businesses are not forced to take out insurance that is far more than the job requires or accept liability for risks they cannot insure against.
According to a statement released by the ICA, it has been 25 years since the last major national review of liability laws, and in that time, rising claims costs, legal fees and system inefficiencies have compounded to make public liability and professional indemnity cover increasingly unaffordable for small businesses and community organisations.
The ICA is also calling for funded risk management programmes to help small businesses and community organisations reduce risk exposure and keep premiums down.
“It has been a quarter of a century since anyone properly looked at these laws, and the case for reform is overwhelming,” said ICA CEO Andrew Hall.
“Affordable insurance is what keeps small businesses and community organisations running; when a local café or a community sports club cannot get cover, it is the local community that loses out.”
He added, “Well-targeted reform can bring costs down while still making sure injured people get fair compensation, and that is the outcome we want to work with governments to deliver.”