The Cost of Common Insurance Claims for Small Businesses
Unforseen losses or damages can have a major impact on a business. They can disrupt normal operations, effect finances, and damage reputations.
By understanding the most common insurance claims, businesses can identify potential vulnerabilities and be better prepared to manage disruptions.
Property Damage and Burglary
Property damage and theft are among the most prevalent claims reported by small businesses in Australia. According to recent data from the Insurance Council of Australia (ICA), property damage claims accounted for 25% of all business insurance claims in 2022, costing an estimated $430 million¹.
What can your business do?
- Invest in security systems that include surveillance cameras, alarms, and access controls
- Conduct routine maintenance and address issues promptly to prevent property damage
- Secure all entry points and install proper lighting to deter potential burglars
- Promptly address any maintenance issues, such as broken windows or malfunctioning doors, to prevent vulnerabilities that can be exploited
- Limit access to certain areas of your business, particularly sensitive or high-value areas. Use access cards or key codes to ensure that only authorised people enter these spaces.
- Train employees to be vigilant and report any suspicious activities
Public Liability
Public liability claims arise when a third party, such as a customer or vendor, suffers an injury or property damage due to your business activities. In 2022, ICA reported that public liability claims accounted for 30% of total business insurance claims, averaging at $14,000 per claim².
What can your business do?
- Keep walkways and premises well-maintained, dry, and free from hazards
- Provide adequate lighting and clear signage to guide visitors safely
- Implement comprehensive risk management strategies, including employee training on safety protocols. Employees should be able to help and address any concerns promptly.
- Have emergency response plans in place for various scenarios, such as fires or medical emergencies. Conduct regular drills to ensure staff are prepared.
- Conduct routine safety inspections to identify and address potential hazards.
- Maintain records of safety measures, training sessions, and inspections. This documentation can be valuable if a claim arises.
Workers Compensation
According to Safe Work Australia, in 2020-21, there were approximately 130,000 serious workers compensation claims across all industries, with an average compensation payment of around $12,000³.
Injuries sustained by employees during work hours can lead to substantial medical expenses and potential legal consequences for businesses.
What can your business do?
- Prioritise workplace safety by conducting regular risk assessments and inspections of equipment, tools, and machinery to ensure they are in good working condition.
- Establish clear workplace policies and procedures and ensure compliance with occupational health and safety standards and regulations.
- Provide comprehensive training to all employees, including proper equipment usage, hazard recognition, and emergency procedures.
- Design workplaces with ergonomic principles in mind to reduce the risk of repetitive strain injuries and other musculoskeletal disorders.
- Encourage communication between employees and management about safety concerns.
Cyber Security Breaches
Recent statistics have shown a surge in the frequency and severity of cyberattacks, resulting in data breaches, financial setbacks, and reputational damage. In the second half of 2022, The Office of the Australian Information Commissioner (OAIC) saw a 26% increase in reported data breaches and a 41% increase in breaches from malicious or criminal attacks.4
What can your business do?
- Educate all employees about cybersecurity best practices, including identifying phishing emails, using strong passwords, and following proper data handling procedures.
- Limit access to sensitive data only to employees who need it for their roles.
- Implement strong network security measures, including firewalls, intrusion detection systems, and encryption, to protect data from unauthorised access.
- Keep all software, including operating systems, applications, and antivirus programs, up to date with the latest security patches.
- Develop an incident response plan that outlines steps to take in case of a data breach.
- Regularly back up your data and store backups in secure off-site locations to ensure data recovery in case of a data breach.
Business Interruption
Events that cause disruptions to business operations, such as natural disasters or supply chain issues, can lead to substantial financial loss. According to the ICA, business interruption claims accounted for 15% of total business insurance claims in 2022, with an average cost of $17,000 per claim¹.
What can your business do?
- Develop a comprehensive business continuity plan that outlines steps to maintain operations in the face of disruptions such as natural disasters, technology failures, and supply chain issues.
- Regularly assess and identify potential vulnerabilities and risks that could disrupt business.
- If possible, diversify your supply chain to reduce the impact of disruptions from a single source.
- Develop remote work capabilities for employees where possible, ensuring that they can continue tasks even during disruptions to the physical workplace.
- Regularly maintain equipment, machinery, and infrastructure to prevent unexpected failures that could lead to interruptions.
- Maintain financial reserves that can cover operational expenses during disruptions, reducing the financial strain on the business.
How Coverforce can help
Our team of experienced brokers can help assess your risks and provide personalised advice on the right insurance program to protect your business and assets.
In the event of a claim, we are on hand to provide advice and minimise disruption to your business. Our dedicated in-house claims team will work with the insurer on your behalf to ensure you receive your full entitlement without undue delay.
For more information or to arrange cover, don't hesitate to contact your local Coverforce Office today.
The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Coverforce directly.
REFERENCES
- https://www.ica.com.au/news-and-media/media-releases/business-claims-hit-record-high-in-2022
- https://www.ica.com.au/annual-reports/annual-report-2022
- Australian Workers Compensation Statistics 2020-21: Safe Work Australia
- https://www.oaic.gov.au/privacy/notifiable-data-breaches/notifiable-data-breaches-publications/notifiable-data-breaches-report-july-to-december-2022
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