Small businesses underinsured during natural catastrophes
Up to half of small businesses do not have business interruption insurance despite it being basic cover that they all should have, according to Zurich national broker manager, general insurance, Keith Till.
When it comes to small businesses, one of the common themes coming out of the Queensland floods appears to be the lack of general insurance and catastrophe cover. Till said a survey of Zurich policy holders three years ago revealed that 74 per cent did not increase the sums insured despite rising costs, such as building materials and steel that have been going up dramatically over the last 10 years. He doubted whether this trend had changed in the last couple of years.
Till said when it came to insurance the difficulty was that people had a fixed number in mind that they were willing to pay.
“People tend to be penny wise, but pound foolish,” he said.
He believed that while cost was an issue, one of the main causes of people either being underinsured, not covered for certain circumstances such as floods, or not being insured at all was because 25 per cent to 30 per cent of the market did not buy through insurance brokers.
“In my view, insurance brokers are very necessary for any business because they are experts in the field,” he said.
He said another serious issue was that between 40 and 50 per cent of businesses did not have business interruption insurance, which he said could be very handy in circumstances where people lost business through external issues even if their own premises were not damaged, such as road closures due to natural disasters.
“For any business, that is an absolute necessity,” he said.
Till added that with flood cover, for example, business income would be protected through business interruption insurance while the premises were being repaired.
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