As a small business owner you’ve probably spent a great deal of time and money to ensure success. You might have sacrificed things and taken risks to turn your idea into something tangible. You may have chosen to do your own bookkeeping, develop your own website and man your own phones in a bid to reduce costs. And you might even be thinking that insurance is just another cost that you can afford to forgo. But have you considered the true financial impacts?

For many small businesses, price is the most important factor when it comes to insurance. As we’ve discussed previously, most of you will be forced to buy insurance through a broker as the insurer will not want to deal direct with you. This means that you may end up paying for cover that you don’t need (although you need to be the judge of that), and you might also pay a insurance broker a fee or commission through your premium. In addition, it is likely that you will be paying for the same insurance product (see the burglary insurance example) as this is the main way in which insurers ‘compete’.

Of course, insurers will argue that they need to hold greater reserves to cover claims but then this is a difficult argument when major insurance companies such as Suncorp are doubling their profits. Still, according to our industry sources, premium rates for small business insurance are still highly competitive…

So, what does this mean for you? Well, consider the photocopier in your office. You like to own what you have and don’t see much point in leasing so you went out and spent a few thousand dollars. The old one died some time ago and is collecting dust in your filing room as ‘insurance’ just in case your new one breaks down. You know that it will cost you about $550 to get the old one repaired.

What happens if your there’s a fire (maliciously lit) in your office over the weekend and you lose both? Well obviously you will need to replace at least one of them – of course, at your own cost as you weren’t insured!

So Mary Joe accidently spills water on the new one whilst she’s photocopying, taking phone calls on the mobile and sorting through the mail. Now you have to get the new one and the old one repaired or replaced.

Say you previously did get the old one repaired and forked out the $550, well, you probably could have insured the new one for about $150 for breakdown therefore actually saving money by taking our business insurance. In fact depending on your policy and your insurer, you probably could have paid $600-$700 (and claimed the GST) and had all of your business contents covered – now wouldn’t that be a better outcome rather than you taking on the risk?

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So you’ve decided to go it alone in your search for business insurance. Presumably you meet all the relevant qualifications and if not, are willing to take the chance. Wouldn’t it be nice to know who you’re dealing with?

Did you know that AAMI, GIO, Suncorp and Vero are all insurance companies owned by Suncorp? Did you hear the recent news that Suncorp is moving into a single ‘pricing engine’ across their insurance business? Well then, please, feel free to read on..

As you may know, AAMI, GIO, Suncorp and Vero all provide small business insurance – most notably the Business Insurance Package. A business insurance package consists of several covers such as public liability, fire, machinery breakdown, burglary and business interruption. To be fair, Suncorp itself has now moved all of its business insurance across to the AAMI brand – so this narrows it down to three ‘options’…

It could be argued however, that this may be reduced further as the Vero brand does not deal direct with the public – essentially, you would need to get it through a broker. However, it’s probably not such a bad idea to keep it in!

If you happen to read each of the respective policy wordings detailing the terms and conditions of your insurance, you might notice in amongst the fine print some similarities. Firstly, each policy is structured in the same way:

- the AAMI contents for example includes 16 sections across 108 pages

- the GIO contents page reveals 13 sections across 104 pages

- the Vero contents page shows 15 sections over 112 pages

Of course, just because its written in the policy wording doesn’t mean it applies to you – you should check your policy schedule for specific coverage and limitations that alter the wording.

In fact, when you compare them side by side you will notice that the AAMI and Vero wording structures are identical. This is not surprising given that both brands previously belonged to the Promina Group, which was purchased by Suncorp. Let’s compare the two:

AAMI & Vero Table – Theft

So apart from the obvious $500 limit difference there does not appear to be much of a difference in coverage – although AAMI appears to make a meal of clause 1. Now lets compare that to GIO:

GIO Burglary Table

Ok, so some different terms used but it would appear to mean the same thing to us – check with a professional if you’re unsure. Of course, this article isn’t intended to compare the wordings but simply to point out that you should know who you are dealing with and to consider whether it is worthwhile paying your broker 20%-25% commission for the same product wording.

Let’s take another section and compare AAMI and Vero for example:

AAMI & Vero Glass example

So again, some slight variations but we would suspect that they are intended to cover the same type of risk. Why is the writing in bold? It’s the insurer’s way of saying that there’s even more fine-print, in this case a definition for that word. Of course, your business conditions, risks and financial needs will differ so it may well be that one policy wording will suit you better – if you’re unsure seek a professional or at least try and figure out who it is that your dealing with and ask them what benefits one brand provides over the other.

Perhaps easier said than done – we’re not sure that Suncorp uses the same call centre and staff for each of their brands although you can be sure that soon enough they will be using the same pricing models to determine your premium!

Next up: the IAG brands – CGU, Swann Insurance and NRMA Insurance.

The latest report on the insurance industry by PricewaterhouseCoopers Australia reveals that Australian insurers are still doing quite well despite a string of recent catastrophes.

At the same time however, industry analysts are reporting that premium rates will increase over the coming months as insurers attempt to recover from poor investment results suffered recently.

With businesses in Australia still recovering from the aftershocks of the GFC, it’s disheartening to see premium increases at a time where some of Australia’s biggest insurance companies such as QBE, Suncorp and Allianz are making hundreds of millions of dollars in net profits after tax. According to the PWC report for example, QBE made $1.97 billion dollars in after tax profit whilst Suncorp made $394 million.

This comes as no surprise given our earlier article on premium increases for businesses during June. Of course, we need not expect much from insurers as the customer is generally a lower priority.

With so much of the Australian insurance market ‘stitched up’ between the top 3 insurers – QBE, Suncorp and IAG and little room for industry consolidation, insurers are looking to invest their money in acquisitions abroad rather than in developing new products or enhancing service for customers.