NSW Businesses Struggle as Insurance Costs Skyrocket

Insurance costs have become a pressing concern for businesses in New South Wales (NSW), with many business owners grappling with substantial premium hikes. The surge in insurance premiums, with some firms experiencing increases of 30% or more in the past year, has raised alarms about a potential insurance crisis that could leave smaller companies vulnerable without adequate coverage.

A recent survey conducted by Business NSW, a leading industry body, highlighted that a significant 78% of businesses in the state faced double-digit rises in general insurance costs over the preceding year. Shockingly, 33% of these businesses reported premium spikes of 30% or higher during the same period, far exceeding the modest annual inflation rate of around 2.5%. This escalation in insurance expenses has overshadowed other financial worries such as taxes, energy costs, and wages, making it the top concern for NSW businesses since early 2023.

The impact of these soaring premiums is keenly felt by business owners like Shiree Bennett, who runs Bennetts Steel, a retail and manufacturing establishment in Wauchope. Bennett expressed disbelief as her annual business insurance bill more than doubled from $5943 to $12,730, a staggering 114% increase within a year. The escalating costs have left many business owners like Bennett feeling helpless, with the burden of covering insurance expenses weighing heavily on their minds, even waking them up in the early hours of the morning.

Daniel Hunter, the CEO of Business NSW, cautioned about an impending insurance crisis as premiums continue to skyrocket unabated across the state. He raised concerns that a growing number of businesses may find themselves either unable to afford insurance or deemed uninsurable if the situation remains unchecked. A survey by Business NSW revealed that a significant 64% of businesses in NSW were not fully insured against catastrophic events, underscoring the urgency for governmental intervention.

Hunter emphasized the need for immediate reforms in state government taxes and charges on insurance policies, particularly citing the emergency services levy, which adds approximately 20% to business insurance premiums. Drawing a stark comparison, Business NSW estimated that Bennetts Steel would have paid significantly less for the same policy if located in Queensland, which does not impose an emergency services levy, illustrating the disparity in insurance costs between states.

The recent focus on the insurance industry was spurred by the aftermath of Cyclone Alfred, which caused widespread flooding in parts of Queensland and northern NSW. The Insurance Council of Australia attributed the escalating insurance prices to inflation in the building and motor repair sectors, increased global reinsurance costs, the growing impact of extreme weather events, and the rising value of assets in Australia. The council stressed the importance of investing in mitigation infrastructure, revising land use planning and building codes, and eliminating unfair taxes and levies to stabilize insurance premiums.

In response to the escalating premiums, Opposition Leader Peter Dutton proposed the potential breakup of insurance companies to foster a more competitive market and address the issue of unaffordable premiums. Despite the challenges posed by rising insurance costs, the Business Confidence Index, based on the Business NSW survey, showed a rise in confidence levels in March, attributed in part to the Reserve Bank’s interest rate cut. This boost in confidence, although relatively low compared to historical standards, indicates a cautious optimism among businesses in NSW.

As businesses navigate the financial uncertainties brought about by escalating insurance costs, the call for decisive action from both state and federal authorities to address the insurance crisis and create a more sustainable business environment remains imperative.