The Canberra Business Podcast
A podcast about all things Canberra Business.
The Canberra Business Podcast
Sleep Soundly: How Proper Insurance Coverage Protects Your Business Dreams
What keeps you up at night about your business? For many Canberra entrepreneurs, the answer increasingly includes insurance costs, particularly skyrocketing workers' compensation premiums. This eye-opening conversation with Gallagher insurance brokers Ceshton Hanns and Andre Ferreira pulls back the curtain on the sometimes-mystifying world of commercial insurance.
The discussion tackles the pressing question of why premiums continue rising, especially in the ACT. While local business owners might question why distant catastrophes like Lismore floods affect their rates, the experts explain how the interconnected nature of insurance and reinsurance markets creates a global ripple effect. For workers' compensation specifically, the ACT's unique jurisdictional requirements combined with its relatively small private sector market contribute to higher premiums than neighboring states. Beyond these compulsory coverages, the conversation explores essential protections including cyber insurance (which even small businesses need as potential "gateways" for hackers targeting larger organizations) and business interruption coverage that keeps companies afloat during recovery periods.
This episode is supported by CareSuper.
Hello and welcome to the Canberra Business Podcast. I'm Greg Harford from the Canberra Business Chamber and I'm joined today by Kishton Hands and Andre Ferreira from Arthur J Gallagher, better known as Gallagher's, the Canberra branch of the international insurance broking firm. Andre and Kishan, welcome to the podcast.
Speaker 2:Thanks for having us.
Speaker 1:So I guess to start insurance broking to many people has got a bit of a mystical ear about it. Do you want to just tell us a little bit about yourselves and what is your role at Gallagher's?
Speaker 2:Yeah, so Gallagher is a global insurance brokerage, risk management and consulting firm. We're actually the third largest in the world. Here in Canberra we've got a team of almost 30. And whilst we work for a global company, we have a regional footprint and we're still the family-run business, with the Gallagher family still leading the company. And my role here is I'm a team leader and broker based here in Canberra. I've got over 25 years' experience and I specialise in workers' compensation, so I'm an advocate for our employers and I try and help them navigate insurance, particularly with claims and risk management.
Speaker 1:So we'll come on and talk about workers' compensation insurance a little bit later, because that's a really topical issue at the moment. But, andre, what's your role before we dive into that?
Speaker 3:I'm a broker 20 years' experience in Canberra, moved here from South Africa in 2005. We are at 15 years' experience in the industry 2005, we had 15 years' experience in the industry, very client-focused, looking at the most positive outcomes for our clients and ultimately being recognised as a trusted advisor to them all.
Speaker 1:So insurance brokers are not insurance companies. You are not the people who are actually insuring your customers. What is it for those who might be confused about this, what is it that brokers actually do?
Speaker 2:so insurance brokers act as intermediaries between the clients and the insurance companies. But it does extend beyond that. As we work on risk management, claims management, I recently had a client who's a business consultant and he said to me I tell my clients that every business needs a good accountant, a good lawyer and a good insurance broker. So I was quite happy with that endorsement. So our clients are experts at their businesses and the organisations that they run. Whether they're a builder or a disability service provider or an accountant, they know their business and insurance really can be an enabler so that they can do their business, protect their hard-earned assets and protect their employees. And we partner with them to become a trusted advisor.
Speaker 2:But at a really primary level, we help clients find the most suitable insurance policies for their needs. So we assess their specific needs, and that, of course, differs by industry and workforce. We research, compare various insurance policies from different insurers and negotiate the best options in terms of coverage and cost. And then we make recommendations to our clients that are going to be best suited to their needs. So they don't need to become insurance experts as well as running their business. They can leave that to us and then in the event of a claim, then we help navigate that claims process and advocate on their behalf to ensure fair outcomes and we really provide ongoing support. So overall, insurance brokers offer guidance and personalised service to help clients make informed decisions about their insurance coverage.
Speaker 1:Okay, Now there's a lot of concern that I'm hearing in the business community at the moment about the costs of insurance. What are you hearing from your customers?
Speaker 3:Well, greg, many of our customers are already members of the Canberra Business Chamber as well and they do share with us, obviously, the challenges they face in doing business Increased costs, of which insurance is one of the costs they also find. Obviously, their customers have less to spend, so, all in all, it's harder for them to do business, but that also, conversely, leads into increased premiums. You know why are premiums increasing the way they do? And it's the same inflationary costs that are faced by our clients, which the insurance companies face as well, and they increase their premiums accordingly, especially the frequency and severity of claims and the resultant impact on claim costs. Locally, we can think 20 January 2020, we had a massive hail event in Canberra, which some businesses are still feeling. 2022, lismore had the biggest floods in Australia. Most recently, we're having the effects of tropical cyclone Alfred. All of these is going to drive claim costs. The number of claims are going to drive through supply and demand of services. It's all going to have an effect and all those effects do drive premiums.
Speaker 1:So I appreciate you're not here to defend the insurance companies, but there'll be people listening to this who say, well, the hailstorm was five years ago and Lismore's not here in the ACT, and Cyclone Alfred hopefully not as horrific as it may be is a long way from here as well. So are premiums set looking only at ACT-specific factors? Or is it Australia-wide or even international?
Speaker 2:It goes as far as international I mean the recent fires in America. That's all going to have an impact on the cost of reinsurance. So insurance companies buy insurance as well. So reinsurance. So insurance companies buy insurance as well, so reinsurance. So whilst premiums are set and the risk factors locally are taken into account as well as the industry-specific risks, but globally, and definitely within Australia, the risk monitoring and overall impact of the cost of claims, the economy, all of those things actually do drive it. So it's a very big picture.
Speaker 1:Kirsten, you touched on workers' compensation insurance a little earlier. That's a big pain point for many of our members at the moment. I'm hearing about premiums that are escalating substantially, doubling year on year in some cases, and being more expensive here than elsewhere in the country. What's your take on that? And again, what's driving those premium increases?
Speaker 2:Again, it does come back down to the cost of claims, but more broadly than that, within Australia we don't have a. Every jurisdiction is different, so we don't have states aligned with each other. So if you're buying workers comp insurance in New South Wales, it's different to ACT as it is to WANT. So every jurisdiction has its own legislation and with that comes the cost implications of claims. And so a business that ultimately looks the same on paper in terms of revenue and the type of services they're providing might be the same, but their cost of workers' compensation insurance is different because of those jurisdiction differences. And whilst ever the legislation sits as it is and there's no reform, then those claims costs are ultimately managed by the scheme. And that's something we're really we're hearing from everyone in Canberra and the question is raised, raised why is Canberra more expensive than another state that has mining and logging and forestry and um? So it's hard for businesses to compete, um, to win business, when their workers conversation premiums are. But ultimately that question keeps coming back to the cost of claims.
Speaker 1:And it's a small market too. Right, absolutely. And what many people don't quite appreciate, of course, is that there's a different scheme for the public service here, so the actual number of people covered by the workers' compensation scheme is relatively small, and that must drive cost right.
Speaker 2:Absolutely yeah.
Speaker 1:So overall, I mean workers' compensation is just one of the insurances that businesses are advised to be looking at, and of course it's actually compulsory here in the ACT to have workers' compensation insurance.
Speaker 2:What other?
Speaker 1:kinds of insurance do you recommend businesses should be thinking about taking out?
Speaker 2:Well, the reason to purchase insurance is always driven by the customer and it could be a contractual obligation, so, whether that be a lease or a contract of service, it could be things like workers' compensation, so they're obligated, as you say. But insurance really can provide financial security and peace of mind to cover a loss that would otherwise be devastating financially to a business. So clients and businesses work hard to build up their assets and have a successful business and really insurance is an enabler sometimes to be able to just get the cover that they need to operate their business. But more importantly, it's a safeguard for those businesses because the cost of not having it can significantly increase the impact in the event of a disaster. But ultimately there's always things like liability insurance and workers' compensation is at that basic level, but it really needs to protect assets and whether those assets are your people or your tangible assets, then you need to have cover to protect what you've built.
Speaker 2:Then there's things that are hard to see, like cyber insurance and the impact of all of the people involved in it's a collective that we keep everyone's data safe. So then there's requirements for cyber insurance. The list can be endless and it's I know, no day's ever the same because we look at so many different types of insurance policies and we work with so many different industries. But really we need to hear from those business owners what are the risks? What keeps them awake at night as well? So my mantra is always I want my clients to be able to sleep at night. So if something can be that a risk can be transferred or an asset can be protected by an insurance policy, then that's that safeguard.
Speaker 1:So let's just talk about cyber insurance specifically for a moment, because I think there's a lot of businesses who kind of often think, oh, cyber security is not really a risk for me because I'm relatively small I hear that quite often from businesses but the risks are real, right, that you could be hacked into, you could be subjected to ransomware, that your data could be taken and published in the deep recesses of the dark web for nefarious purposes. Do you think businesses are taking cyber security seriously enough?
Speaker 2:Do you think businesses are taking cybersecurity seriously enough? I think those that are contracted to the government are being forced to understand it, which is good, but then ultimately needs to be more education around it, and that needs to be a collective at a government level, as well as insurers and the IT providers. The mystery around cyber insurance is is to a lot of people, it's another language that's spoken and the acronyms and what do they understand. But it could be simply that if their systems aren't up to date or there's a patch not put through, and they may contain or hold a certain amount of data data but they also could be a gateway into a bigger organisation, so they just could be a contractor to a bigger organisation, and these cyber criminals will use that gateway to get into the real data that they want to access. And cyber crime is an alarming and escalating risk.
Speaker 1:Now I appreciate here we're talking very, very general observations about the insurance market. Nobody's asking you to provide specific advice here. But, andre, do you find your customers I mean, is it like domestic insurance, where you pay, have a higher excess to reduce your premiums or perhaps put limits on your level of cover? Is that what happens on the commercial market as well?
Speaker 3:Most definitely I mean insurance. Ultimately is you know where you select how much of your risk you want to transfer onto an insurer and obviously, the less you know, the more you're prepared to take the risk on in terms of a higher contribution to a claim. Insurers will recognise that and offer you a lower premium.
Speaker 1:There'll be some people listening to this who perhaps roll their eyes particularly around cyber insurance, and say well, you know, I get a questionnaire asking me a whole lot of technical detail that I don't understand, and I pay all this money to insurers and I never claim, but the premiums go up every year. They'll be asking themselves do I really need insurance? What's your response to that?
Speaker 2:Well, it can usually be very hard to do business without it. So the reason to purchase insurance is always driven by the customer, their attitude to risk, and it comes back to those things that. Do they have a contractual obligation? Do they need to take out insurance to win a contract? Do they need to protect all of their assets? It really comes down to understanding what their attitude to risk is as well. So one person may feel that it's okay if something happened, a disaster or a loss happened, I could cover that, and that's okay. That's great if you don't need it. But ultimately, if a large event happens or a loss that would be devastating, that you can't recover from, then you would need insurance, or you would definitely be in a better position to have insurance.
Speaker 1:And is it right that some of the risks that you're insuring against are potentially unforeseeable, particularly in the public liability space? You might not see something coming that does hit you, but your insurer will step into the breach, presumably to pick up the bill.
Speaker 2:Definitely. I mean there's regulations and compliance on businesses, that they may have all the checks and balances in place, but accidents happen, things can go wrong, advice can be given and there's always that supply chain as well. So where someone ultimately feels either wrong done by then, they may cast their net white to seek damages from a lot of people, and that can be. You know, in the construction industry it could be something like the principal and the builder, right down to the quantifier Everyone involved will get roped into being responsible to answer to that claim. And that's where you may not have even foreseen that risk coming, but the insurer would step in.
Speaker 1:Do you think business people generally understand the level of cover that they require?
Speaker 3:Another good question, as Keshen had alluded to before, there's so many reasons why businesses need to have insurance to trade, trade, and we do find that, other than that basic level of insurance, we do speak to all the additional covers which which are available to them and have them understand especially the value of having valuations of their business done to to insure against being underinsured. That's particularly good advice we offer. And then I mean you talked about cyber and looking at the additional exposures that can really catch a small business off guard. Business interruption is one of them where we we really sort of put an emphasis on that, because should a major event happen and it may take some time for that business to get back up to their feet, how will they survive? And business interruption is one of those forms. So we're continuously looking and working with our clients to ensure that they have a wide range of coverage.
Speaker 1:You raise an interesting point about business valuations.
Speaker 2:What other?
Speaker 1:paperwork or documentation should business owners be thinking about keeping in the event of a claim?
Speaker 2:Definitely any of their contractual requirements and they can date back seven years that you would need to go back potentially if you'd given advice in a matter or on a contract. So I also build property valuation, so that's really important to always be looking at the valuation of, and taking into account construction costs and looking at updating security systems, fire protection. All of those things really need to be taken into consideration.
Speaker 1:So, given the importance of insurance, what is it that businesses can do to keep their premiums?
Speaker 2:down.
Speaker 1:In a domestic situation, you can install a burglar alarm or put some CCTV in, but what's the best thing businesses can be thinking about?
Speaker 2:Definitely risk management. A lot of risk can be managed with insurance actually being the last line of defence. Or insurance is a risk transfer option when you're looking at your risk matrix or framework. So Gallagher's definitely focused on risk management and working with clients to have a framework that works alongside their insurance program. Because when we present a submission to an insurer that includes proactive measures, then that has a significant impact on our negotiations.
Speaker 2:So for organisations, especially not-for-profits, good governance is key of proactive measures, then that has a significant impact on our negotiations. So for organisations, especially not-for-profits, good governance is key. For a property owner that conducts, say, regular thermographic scanning of their electrics or roof inspections, then their submission is going to be favoured over one that hasn't prioritised that maintenance. So, and coming back to the point of like a client's risk tolerant, whilst one client might want to keep premiums down by increasing deductibles, another client might want to focus on the highest level of cover in the event of a claim. So we need to listen to partners and our clients to say what can they do to keep costs down, what's feasible and ultimately hope that that also enhances their business.
Speaker 1:Now, of course, there's steps businesses can take to keep your costs down, but they often come at a cost themselves. So is it right to say that the trade-off for customers or for businesses is to be thinking about the value of the investment to protect the asset versus the cost of insurance?
Speaker 2:Yeah, it can come down to a simple calculation like that and often we see a client might look at the cost of their insurance, but then when we look at, say, the percentage of their turnover or the investment of their business, but then when we look at, say, the percentage of their turnover or the investment of their business, and then we look at what is the margin of that cost ultimately and that's where I think insurance really does provide that value and a broker talking through all of those decision makers with the client, then that can give them comfort.
Speaker 1:Excellent. So some really interesting things there to be thinking about. I think for many businesses, particularly small businesses, do you think you know across the board? Do you think businesses have the cover they need?
Speaker 2:I think that they do. I think Canberra in particular a well-educated, well-informed jurisdiction and hopefully, that they're choosing to protect assets whilst they're considering those costs and running their business. So, ultimately, if they're speaking with their insurance broker and understanding, you know, to the level that they need to, of what's going to happen, because, ultimately, if they that day comes when perhaps their building is on fire and they give us that call and go, keshton, this is the day. I didn't think I'd have to call you, but I am and then it's well, we're glad that they can call us and that policy is going to respond.
Speaker 1:Excellent. Well, thank you very much for that. Now, of course, today we've been talking insurance and it is important to note that, to the extent that any of the information provided in this podcast could be considered advice, it does not take into account any of your personal objectives. Your advice it does not take into account any of your personal objectives, your needs or your financial situation. You should consider whether products and levels of cover presented are appropriate for you and always review all relevant materials, including any product disclosure statements, policy wordings and any difference in conditions notice before deciding to take out an insurance policy. I'm Greg Halford from the Canberra Business Chamber. I've been talking to Keshton Hands and Andre Ferreira from Gallagher. It's been great having you on the podcast. I really appreciate the insight you've brought through to us today.
Speaker 1:Thank you, Greg, Thanks for having us Now this podcast has been brought to you, of course, by the Canberra Business Chamber with the support of Care Super, an industry super fund with competitive fees and returns, exceptional service and a focus on real care. Don't forget to follow us on your favorite podcast platform for future editions of the Canberra Business Podcast and we'll catch you next time.