Is your small business prepared for these 4 emerging trends?
The past 20 years have seen some phenomenal changes in the Australian small business landscape, and Amanda Whiting, Executive General Manager for CGU’s Small to Medium Enterprise Division has plenty of insights.
Having been a small business owner for numerous years in the hospitality sector, Amanda is no stranger to the demands and challenges felt by more than two million small businesses across Australia.
Like many small business owners, Amanda and her husband started a business because they wanted to be their own boss, with more work-life flexibility for their young family. As with many new business owners before her, she discovered some of the unique learnings that come with running your own business.
“What we learnt quickly was that it’s great to do what you love but suddenly you have to manage different roles that you previously didn’t have any knowledge of."
“As a small business owner, you are the IT manager, HR manager, sales manager – not to mention being responsible for managing your accounts, legal responsibilities and having the right insurance,” she says.
Keeping up with an evolving landscape
Despite having a background in corporate insurance, Amanda found business insurance was not as straight-forward as she expected.
“It was a real surprise. There are so many considerations when you’re setting up a small business. Most businesses understand they need public liability, but many don’t realise they need management liability or professional indemnity.”
She says business interruption is also key to make sure you can continue operating if something happens. “It’s a cover that’s often overlooked, as many people don’t think about how much income they can lose while they wait for assets to be repaired or replaced after an incident, or how they would pay their ongoing staff costs or retain their customer base if their business couldn’t operate.”
Another emerging area that small business owners need to consider is cyber insurance – and it’s not only relevant for businesses in technology.
“You need to protect your customer’s data and I’m not sure that small businesses are aware of the risks in this space. Even simple things like offering free wifi in your café can carry unforeseen cyber risks to your business. It was a big learning curve for me,” Amanda says.
Emerging insurance trends
CGU is backed by Australia’s largest insurer, IAG and its insights across the SME landscape show that:
Nearly 40% of Australian small businesses haven’t updated their insurance for buildings, stock or contents in the past year.
Small business owners are putting themselves at risk by failing to do an annual review of their building, stock and contents insurance.
The cost to replace and repair business assets fluctuates each year, and in some areas the cost to replace a building has increased by more than double the consumer price index (CPI) in the past year due to building code changes and increased labour costs.
It’s important that small business owners check their cover annually, so they aren’t out of pocket when they need to make a claim.
Another daunting fact is that less than a quarter of small businesses are not financially protecting themselves against business interruption, despite this being one of the most expensive types of claims.
Australian small businesses continue to neglect this important cover, despite the average business interruption claim costing more than $20,000 – nearly as much as a liability claim.
Another trend we’re seeing is an increase in business interruption costs above CPI. This is largely being driven by factors such as specialised machinery being more easily damaged, yet difficult to repair.
Customer buying behaviours are also changing more quickly, and a business that is closed for only a few days can quickly lose their customer base to a competitor.
Of the 97% of small businesses who have public and products liability cover, a staggering 45% only have the basic minimum cover.
While the majority of small business owners understand the importance of insurance for liability claims, only 45% have the basic minimum cover.
If a small business owner who has only taken out the minimum liability cover is hit with a large liability claim, they could have a multimillion dollar financial shortfall – which could be game over if you’re struggling with cashflow.
And the chances of a liability claim for a small business is real – especially in personal injury cases or where negligence causes significant property damage.
Nearly 50% of SMEs recognise the importance of cyber insurance, but less than 10% of small businesses have cover.
Nearly 50% of small business owners recognise the increasing importance of cyber insurance and the rise in cyber threat, showing an increasing awareness of this risk. However, less than 10% of small businesses have purchased cyber insurance and have appropriate levels of cover for their business.
One size doesn’t fit all
Amanda says that the level of sophistication around insurance is changing and we are seeing more bespoke coverage based on people’s needs.
“Just as there’s no such thing as a ‘one size fits all’ small business, there’s no such thing as a ‘one size fits all’ small business insurance policy. That’s why it’s important for small business owners to ensure they’re insurance needs are tailored to their business and their unique situation."
"It’s also not a set and forget strategy. You need to update your cover every year to ensure you have the right match for your business needs."
"A lot of small business owners are looking to take charge of their business, and at CGU we want to make sure they can make informed decisions about their insurance cover, and find a product that is tailored to them,” she adds.
Drawing on her personal experience, Amanda says SMEs should be able to enjoy the sense of achievement in having their own business and being their own boss rather than stress about whether they have the right things in place.
CGU insurance offers cover for over 700 occupations as part of our small business insurance offerings, and ensures our customers customise their insurance package to suit their industry and business needs.