Underinsurance has always been a persistent threat to small and medium enterprises (SMEs), but the rising cost of living and a string of “insurance catastrophes” has exacerbated the issue in recent years.
In response to the underinsurance challenge, BizCover for Brokers urges brokers to help SMEs address underinsured or uninsured risks.
“Underinsurance is an ongoing issue for small businesses,” says Grant Williams, BizCover for Brokers’ Head of Intermediated Business. “It’s essential that brokers are able to help SMEs identify and address areas where they do not have adequate cover.
Typically, a business is considered underinsured if its policies cover less than 80% of the asset the business is insured for. For example, if a business asset is worth $100,000, but it’s only insured for $60,000, the business is considered underinsured by 40%.
This gap in coverage means that when disasters strike, the insurance payout may not cover all the costs, leaving businesses to pay significant out-of-pocket expenses.
Unfortunately, underinsurance is a real risk faced by many business owners, especially given inflation and the rising costs of things. A Vero report showed only 29% of business owners consider the increasing replacement costs involved with claims when renewing their insurance.
To make matters worse, the Insurance Council of Australia has noted that there have been 13 declared “insurance catastrophes”, from the Black Summer of 2019-20 through the recent NSW floods. In 2022 alone, there were more than 302,000 disaster-related claims, resulting in $7.26 billion in claims.
These events, along with the combined effects of a chronic labour shortage and the rising costs of materials, has sowed the seeds for the underinsurance risks to worsen.
This is where the importance of brokers in properly explaining the risks of underinsurance to their SME clients is crucial. “While the reasons for underinsurance are complex, brokers can help their clients avoid the pitfalls of underinsurance,” says Williams.
Williams also emphasised the importance of providing a proper risk analysis about the effects of underinsurance for the brokers themselves. “Failing to maintain appropriate coverage or explain this risk of underinsurance could expose the brokers’ own E&O,”
“By allowing brokers to quote, compare, and bind multiple products swiftly, the B4B platform removes many of the time-consuming inefficiencies found in the traditional broking process.” Williams continued “This empowers brokers to advocate for their SME clients and ensure they are adequately covered.”
About BizCover for Brokers
BizCover for Brokers is a full lifecycle platform for business insurance that streamlines the end-to-end process when servicing their SME clients. Created by brokers for brokers, the platform empowers brokers by increasing efficiency.
The B4B platform boasts a broad appetite across eight products covering over 6,000 occupations. With a single data entry, brokers can compare multiple quotes for multiple products from multiple insurers and bind in minutes. Every broker on the B4B platform also has access to our dedicated Customer Support team for additional assistance when they need it most.
Media Contact
Adriana Rey
adrianar@bizcover.com.au
0431 537 874
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