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SMEs hit hard by catastrophes
When natural disasters strike communities, small businesses take the brunt of the economic impact.
That’s a sobering finding from a report compiled by insurer IAG, which has found that on average between 65% and 72% of the total economic impact from the 2019 Townsville floods and 2019/20 Black Summer bushfires fell on small businesses.
The economic impact of the Townsville floods was estimated to be a $2.5 billion reduction in GDP, with the impact on small businesses making up $1.5 billion of that total.
The economic impact of the Black Summer bushfires was estimated to have caused a $2.7 billion reduction in GDP, with small businesses in NSW alone making up $1.8 billion of that figure.
SMEs are the backbone of the Australian economy and the communities they serve, employing more than 4.7 million people. But they are also uniquely exposed to natural catastrophe risk, making risk reduction and insurance cover absolutely vital. That’s why you should regularly be in touch with us about your business and its insurance needs.
The IAG survey shows that only 44% of affected businesses in Townsville which had flood cover also had business interruption cover.
Yet more than 60% of impacted businesses needed to close or reduce operation, with 20% interrupted for 6-12 months.
And 67% of flooded small businesses believed their business was not in a flood zone, while a further 20% opted against flood cover because the business was not on the ground floor or in a basement.
With natural disasters expected to increase in frequency and severity as climate change ramps up, and the impact on small businesses clear, it is vital that business owners prepare properly.
The insurance industry is pushing governments to invest in mitigation measures such as flood levees to reduce the impact of natural catastrophes, but there’s a lot that you can do as well.
Carrying out a thorough disaster risk analysis helps you understand the scale of the threat, and insure accordingly.
Regularly reassess dangers and talk to us to make sure that you’ve got the cover in place that you need.
Ignoring flood or business interruption cover could put you in a very difficult spot should disaster strike.
IAG’s report shines a light on the toll that catastrophes can take on small businesses. Don’t ignore the warnings – act on them.
We hope you never need to make an insurance claim, but if you do, you’ll be glad you took action and talked to us about it.