Small businesses forced to close due to insurance crisis

A large number of small businesses are having to close due to their inability to get public liability insurance cover, according to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

Ombudsman Kate Carnell has called on the Federal Government to immediately implement the recommendations in her Insurance Inquiry so small businesses can access essential insurance products, including public liability, and keep their doors open.

“Throughout the course of our inquiry, hundreds of small businesses told my office they face closure if insurance remains unavailable to them,” Carnell said. “Small businesses have told us they have either been denied insurance outright or their premiums have as much as tripled in a few years, effectively pricing them out of the market.”

The Ombudsman cited the case of the Barra Fun Park in Townsville, which decided to shut down after 20 years of operation because no insurer was willing to renew the public liability insurance policy taken out by owner Brent Stevenson.

“In the two decades Barra Fun Park has been operating, there has only been one insurance claim against his business,” Carnell said. “The claim resulted in a $70,000 payout to a patron who sustained an injury (hyper-extended thumb) at the park. Brent subsequently saw his insurance premium nearly triple and paid the annual fee, only to be shut down for six months due to COVID restrictions.

“This is not just one isolated incident – 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,” Carnell added. “That’s why our Insurance Inquiry has made recommendations addressing the lack of availability of public liability insurance, which is in large part attributable to the unlimited nature of injury claims and the potential for large damages to be awarded.”

The Ombudsman’s Insurance Inquiry recommended that Australia follow New Zealand’s lead in applying statutory caps on liability for personal injury.

Carnell also urged the government to implement the Productivity Commission’s recommendation to roll out a no-fault National Injury Insurance Scheme (NIIS) that will cover lifetime care for catastrophic injuries.

“It’s been nine years since the Productivity Commission released its Report into Disability Care and Support and yet the NIIS is still under consideration, much to the detriment of the small business sector,” Carnell pointed out.

“Ultimately, the risk environment for public liability litigation can only change through government intervention and the current framework of fault-based injury compensation creates uncontrollable risks for insurers and small businesses.”

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