Small businesses are concerned insurance premiums will rise in the next 12 months, following a string of disasters around the country, according to the latest findings from the Vero SME Insurance Index.
The index, which is backed by insurance group Suncorp, interviewed 800 SME owners and insurance decision-makers across the country.
The survey found 75% of SMEs expect premiums to rise this year, with half of those expecting the increase to be at least 10%.
Andrew Mair, the executive general manager for distribution and commercial insurance at Suncorp, told SmartCompany the results aren’t surprising – but warned SMEs shouldn’t be too concerned, as pricing changes will vary based on specific locations.
“We had another summer of events in Australia, and it does raise the level of awareness and expectation that, on the whole, premiums will rise. There weren’t many states and territories not touched by some form of natural event.”
“If people think that’s happening, it does have a flow-on effect of expectations. But different things impact different groups in very different ways.”
The survey mentioned the “potential impact of this finding is significant”, as SMEs may be at a critical level when it comes to insurance costs.
“There is a dramatic drop in respondents who say they could pay increased costs and/or pass them on to their clients,” it said.
Although the survey is focused on providing advice for brokers, there are some good takeaways for SMEs. The survey found confidence is flat, although the number of businesses which said they are “less confident” rose by one percentage point.
The report noted the impact of the high Australian dollar has “created a climate of continuing uncertainty and caution”, with a key fear being higher pressure on margins.
“The result of this added pressure on margins is a perception of increased risk and vulnerability in the face of market competition and an uncertain economy.”
“SMEs are therefore locked into chasing increased turnover and/or focusing on costs. Business insurance is a significant cost component for many.”
Mair says SMEs don’t necessarily need to worry about rising premiums, although says businesses in different locations need to consider how likely they are to be affected by natural disasters.
“We try to avoid that, we target specific geographies and stick to a local level.”
Most recently, businesses affected by the Queensland floods said they would be concerned over how insurance costs would affect them.