While the cost-of-living crisis continues to hurt consumers, South Australian Business Chamber CEO Andrew Kay said the current environment also remains challenging for the state’s businesses.

“Ask any business owner which of their costs has seen a significant increase over the past few years, and the answer will be ‘all of them’,” Kay said.

“The only difference will be which sector they belong to, as some have felt the impact of certain increases more than others.

“Wages, energy, fuel, rent, interest costs and inputs have all seen significant price hikes. The other cost that has seen a massive blowout is insurance.”

ABS data shows that insurance costs grew by 16.1 per cent in the last calendar year, a 20-year high.

“However, we know from speaking to our South Australian Business Chamber members that many business owners have experienced far higher increases than that,” Kay said.

The growing need for cyber insurance and the impact of recent floods and bushfires have compounded the problem.

The quarterly SA Business Chamber/William Buck Survey of Business Expectations found in September 2023 that only 5.5 per cent of respondents’ insurance premiums had been unchanged since 2020.

Just over half said their premiums had increased significantly, while another 43 per cent had experienced a “moderate” increase.

Kay said that aside from cyber and natural disaster cover, the biggest challenge for many of the surveyed businesses has been public liability cover.

One events company had seen their staging and marquee liability insurance increase by a staggering 504 per cent in 2022 and a further 50 per cent in 2023.

“Is it any wonder we are seeing music festivals disappearing from our calendar at the slightest sign of slow ticket sales?” Kay said.

SA Business Chamber recently spoke with regional business owners, who said it was a challenge to even get insurance in high-risk areas, with businesses sometimes settling for partial cover with costly premiums.

Kay quoted one Adelaide Hills trader, who said, “…we are taking increased risks that do not sit comfortably. We were denied insurance last year because of the River Murray flooding and the broker ended up finding us a company that would partly insure, but of course premiums were very, very high”.

One business owner in the state’s north told SA Business Chamber that, even for a relatively low-risk business like theirs, insurance had become “ridiculously expensive”.

They considered reducing their insurance cover, but resisted self-insuring – that is, putting money aside to cover any possible future losses – as they were still in drought recovery mode.

The pressures faced from the cost of doing business have seen many operators change the way they approach insurance.

This is backed up by a finding in the 2023 Vero SME Insurance Index that 47 per cent of businesses have changed some aspect of their coverage in response to rising costs in the last couple of years.

The Index also noted that many businesses being “underinsured” is becoming an increasing concern.

Taking the option to self-insure comes at a high risk. Few businesses can afford to do so effectively and may be placing themselves in jeopardy if they punt on building a position of coverage over time.

The absence of insurance when needed can be the difference between ongoing operations and closing the doors.

Kay pointed to the recent story about storm damage prompting the closure of the café at the Big Rocking Horse as “a salient reminder of how marginal survival can be for businesses in these difficult times”.

“The increase in business costs has placed many owners in a difficult position, trying to juggle the ‘essential’ payments with trying to find cost savings,” Kay said.

“We know of instances where insurance costs have led to operators exiting their sector.

He said insurance remains a risk that has to be managed, and under-insuring or self-insuring is “a gamble at best and a disaster at worst”.

He advised that the best option to mitigate that risk was to explore every avenue with a broker and to shop around.

“Meanwhile our policymakers need to use their powers to explore opportunities for insurance reforms that can ease the cost burden and provide security for small business operators,” he said.

South Australian Business Chamber is a sponsor of the South Australian Business Index lunch and networking event on Friday, 20 September at the Adelaide Convention Centre. Purchase your individual ticket or table of 10 now.