How does rising inflation affect Small Business and Personal insurance?

The rising inflation we’re experiencing now is affecting insurance in a number of ways.

Materials commonly used to replace damaged properties, such as building items and even labour, are in short supply, driving up replacement costs.
In these times, it’s important for small businesses and home owners to make sure the sum insured for their assets reflects their current replacement value so that if your property is damaged, the settlement should be sufficient to cover the costs.

If the sum insured is not accurate, this may impact the settlement received if you have to make a claim.

Insuring for the true replacement cost is crucial, and there is one major factor to consider:

In business insurance there is generally a co-insurance clause that states you have to insure for the replacement cost of the building as at the time you take out the policy.

That’s relevant in the current inflationary environment because, unfortunately, the cost of materials and building costs have increased significantly.

If the insured amount is $1 million and it’s going to cost $2 million to replace, you’re $1 million out of pocket.

If you don’t insure for full replacement cost, in the event of a claim, the insurer can reduce the amount of the payout even if there is not a total loss.

The way in which this works is complex and depends on the wording of the particular policy. However, the following is an example based on common wording:

  • Sum Insured on the building: $1,000,000.
  • Actual cost of replacement of the building: $2,000,000.
  • Cost of repairs: $200,000.
  • Amount payable under the policy as per co-insurance clause = ($2,000,000 x 80%) = $1,600,000.
  • Sum Insured of $1,000,000/ by amount payable $1,600,000 = 62.5% rate of cover
  • Cost of Repairs of $200,000 x 62.5% rate of cover = $125,000
  • Amount payable = $125,000. Leaving $75,000 uninsured / Co-Insured by You.

Although if the building burns down, the insurer only has to pay the sum insured. If the insured amount is $1 million and it’s going to cost $2 million to replace, you’re $1 million out of pocket.

Yearly review of sum insured recommended.

Underinsurance can be a serious problem in Australia, especially when people don’t regularly review the sum insured. Small businesses and home owners should aim to review the value of their assets at least once a year – possibly twice a year at the moment because the increases are so significant.

Every time a policy is renewed, you should be working out the replacement cost of the asset and talking to us about the adequacy of your program.

If your property or asset has an unusual feature, it’s best to periodically use either a quantity surveyor or a valuer to get a more accurate calculation.

Calculations should factor in a time lag.

Another point small businesses and home owners should consider is that if your building or another asset is damaged or destroyed, it may take a while to replace, as some materials are not currently accessible.

Jobs that previously took six months can now take 12 months because the materials aren’t available.

Also, if a significant amount of work is required, it will probably take a while to get council approval. In the time required to get either approval or for the materials to be sourced, costs could have risen again. All this needs to go in the mix when working out how much cover you require.

Please don’t hesitate to reach out to us on (02) 9587 3500 or if you have any questions.

Original article source: Steadfast.

Statutory Liability insurance – should transport companies have it?


Each year in Australia transport operators die or are injured doing their jobs.

To help improve the safety of drivers and their goods there are several regulators involved in a transport company’s business. Day-to-day activities of the regulators can involve education, site visits, or even on the spot fines about minor compliance problems.

Should a serious compliance problem or an incident occur those regulators suddenly may be looking to launch an Inquiry against your company, or even serve your business with papers to go to court.

And that’s when Statutory Liability insurance can really help out.

What sort of incidents are transport operators are going to court for, and how can Statutory Liability insurance reduce the financial burden on those companies if this occurs?

How does Statutory Liability help?

Statutory Liability cover is designed to respond to:

  • Costs that are incurred in an Inquiry from a regulator.
  • Costs that are incurred in defending your company in court from a regulator.
  • Certain costs from an Enforceable Undertaking agreement.
  • Fines or Penalty payments from those regulators, where legally allowable.

Let’s now look at those regulators; NHVR, Worksafe and EPA.

National Heavy Vehicle Regulator

The first regulator to consider is the “National” Heavy Vehicle Regulator (despite the name, WA and NT operate under different regulations). They are the regulator for the Heavy Vehicle National laws, which sets out guidelines for the use of heavy vehicles (think trucks, buses, mobile cranes, and agricultural equipment).

In 2021 alone the NHVR resolved at least 14 court cases and 7 Enforceable Undertakings for improper practices relating to heavy vehicles.

The NHVR has prosecuted for:

  • Exceeding licenced fatigue management or driving duration.
  • Managerial failure to take reasonable steps to manage or track driver fatigue.
  • Falsified work diary (including referencing camera data or GPS data).
  • Improperly secured load – with or without a load falling off.
  • Insufficient training or induction to drivers.
  • Load weight or dimensions exceeded.
  • Vehicles improperly modified.

Prosecutions were made against both companies and individuals.


While NHVR monitors driver fatigue for much of Australia, that doesn’t mean transporters are off the hook with WorkSafe. Injuries or unsafe practices off the road can quickly have WorkSafe knocking on your door.

WorkSafe has prosecuted for:

  • Failure to maintain vehicles at a safe level.
  • A vehicle or trailer striking someone at their workplace (such as due to a brake failure).
  • Injury sustained during loading or unloading.
  • Injury sustained from a load falling off of a parked vehicle.
  • Managerial failure to educate drivers about safe driving and driving fatigue.
  • In WA and NT, WorkSafe can also prosecute for the NHVR events outlined above.

Prosecutions were made primarily against companies, but individuals can be held accountable for their actions.

Environmental Protection Authorities

State and Territory EPAs are regulators that monitor pollution, waste, and the overall state of the environment. While their responsibilities and prosecution frequency can vary by location, EPAs are interested and monitor transport companies.

EPAs have prosecuted for:

  • Failure to use correct ‘dangerous goods’ signage and similar.
  • Failure to arrange permit or to transport hazardous waste.
  • Failure to have a Waste Transport Certificate, consignment authority or similar.
  • Pollution spill due to improperly secured load.
  • Vehicle accident caused transported goods polluting local area.
  • Falsified weighbridge information.
  • Failure to inform EPA of an event.
  • Failure to meet the conditions of an EPA licence.
  • Chemicals leaving your depots or sites through pipes, storm runoff, refuelling accidents or decommissioned machinery.
  • Petrol or oils spilling on-site from storage tanks.
  • Offensive odours being smelt at neighbouring properties.


Both on the road and off transporters have the risk of breaching their statutory obligations and a regulator taking the company, driver, or executives, to court.

Statutory Liability insurance can reduce the financial burden through early legal intervention, reimbursing Defence Costs or Inquiry Costs, and where possible also covering fines or penalties imposed by the courts.

Please don’t hesitate to reach out to us on (02) 9587 3500 or if you have any questions.

AuthorStand Underwriting.
Source: Steadfast.