Too many small businesses are being forced to close their doors because they can’t get public liability insurance, according to Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell.

Carnell has called on the Federal Government to implement the recommendations in her Insurance Inquiry, before more businesses are forced to shut down from a lack of cover.

High insurance costs prohibitive to business

The ombudsman says the government needs to take urgent action to ensure business owners can access essential insurance products saying the (sometimes) tripling of insurance costs has priced many small businesses out of the market.

“Throughout the course of our inquiry, hundreds of small businesses told my office they face closure if insurance remains unavailable to them,” Carnell says.

“One heartbreaking example of this is Barra Fun Park in Townsville, which is sadly closing its doors this Sunday after 20 years of operation. Owner Brent Stevenson cannot find an insurer willing to renew his public liability insurance.

“In the two decades Barra Fun Park has been operating, there has only been one insurance claim against his business. The claim resulted in a $70,000 payout to a patron who sustained an injury (hyper-extended thumb) at the park. Brent subsequently saw his insurance premium nearly triple and paid the annual fee, only to be shut down for six months due to COVID restrictions.

Business owners impacted by billowing insurance costs

The ombudsman says this is not an isolated incident with those in the recreational industry particularly impacted by insurance gouging.

“We know there are many small businesses, particularly those offering recreational activities such as caravan parks with splash zones and jumping pillows, that are in the same boat. That’s why our Insurance Inquiry has made recommendations addressing the lack of availability of public liability insurance, which is in large part attributable to the unlimited nature of injury claims and the potential for large damages to be awarded.

“Our report recommends Australia follow the lead of New Zealand, which has applied statutory caps on liability for personal injury. We need a civil liability framework that actually works.

Government must act on insurance crisis

Carnell suggests the government should also implement the Productivity Commission’s recommendation to roll out a no-fault National Injury Insurance Scheme (NIIS) to cover lifetime care for catastrophic injuries.

“It’s been nine years since the Productivity Commission released its Report into Disability Care and Support and yet the NIIS is still under consideration, much to the detriment of the small business sector.

“Ultimately, the risk environment for public liability litigation can only change through government intervention and the current framework of fault-based injury compensation creates uncontrollable risks for insurers and small businesses,” Carnell concluded.

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