Thousands of business owners across northern New South Wales are cleaning up in the aftermath of flooding. Credit: AAP Image/Jason O’Brien

The government spends 3% on mitigation and 97% on cleanup after natural disasters, according to Andrew Hall, chief executive of the Insurance Council of Australia.

But that’s not the only sobering statistic Hall shared during a panel on how small businesses should approach insurance in uncertain times on Wednesday at the COSBOA National Small Business Summit in Sydney. .

The insurance industry has received more than 170,000 claims since recent flooding in northern New South Wales and southeast Queensland was declared a disaster, Hall said.

And the sector is likely to file $2.3 billion in claims, based on past disaster averages, from the floods.

Hall said the most pressing issue facing small businesses is the growing difficulty of accessing insurance across swathes of the country in areas prone to bushfires or floods, combined with a market for l strained insurance that is driving up prices globally.

The medium-term challenge ahead for flood-damaged homes and businesses, particularly in Lismore, he said, will be an uneven rebuilding effort defined by residents’ ability to claim insurance.

Alexandra Hordern, director of the Australian Small Business and Family Business Ombudsman (ASBFEO), which helps resolve disputes and advocates for small businesses and family businesses, told the summit that the term “market failure” was become a slogan around the world. small business sector.

While rising prices have been defined by the insurance industry as a sign that the market is working “because they are pricing risk”, Hordern said “small businesses are saying: this market is really not working” .

How can the insurance industry better serve small businesses?

“Risk mitigation is really, really important in some of these high-risk industries,” Hordern said.

She said the comments she had heard from small businesses on the ground were that they wanted to see increased funding for “preparedness and resilience to natural disasters”.

“The appetite for underwriting and risk is significantly reduced, and we’re in that part of the cycle,” Hall said.

Hall said the Insurance Council over the past six months has developed a business advisory council that will work bilaterally with industry associations on matters relating to insurance costs.

“If we can work bilaterally with the industry associations and provide a flow of information from insurers through that association on the key risk factors that set the price of the product so high, we can start to define what needs to be done,” Hall said.

Hall described this collaboration as being “either in terms of better information coming back into the insurance industry so we can see how risks are being managed” or insurers working with industry associations to push for the reforms that might be needed and which drive the costs.

He said as disaster management becomes a bigger concern for more small businesses, collecting data among industry associations that could provide a clear picture to the insurance industry would be a valuable tool.

“Industry associations, especially ones with very good ties to their members, can gather insights into how your industry is managing risk and self-regulating,” he said.

“How can we provide that to the underwriters who are doing the work to understand what the risks and costs look like? There are many examples where we do this and have practical results.

“A Turning Point”

Hall also admitted that there was a limit to what the insurance industry could achieve in the absence of more federal action on disaster mitigation and preparedness.

“We are at a turning point right now in the country,” Hall said.

And in response to a question about whether the insurance industry should contribute to preparedness efforts, Hall replied that the NSW government was currently receiving 40% of insurance companies, but the industry was unable to designate how that money was spent.

While companies may initiate their own adaptation of the property, for example by ensuring that electrical equipment is located higher, to reduce their insurance premiums, there is also a broader conversation about the level of risk that state and federal governments should allow businesses to operate indoors.

“There is a window of opportunity, particularly in the next few weeks, to make decisions about the future, especially at Lismore,” Hall said.

“There are another 10 towns that could be another Lismore in the next few years.”