The Insurance Council of Australia (ICA) has set out a series of proposals on insurance taxation, climate and cyber resilience, small business risk education, and workers’ compensation in submissions to the federal inquiry into small business insurance.
The ICA’s submissions describe insurance as a core operating cost for Australia’s roughly 2.5 million small businesses, which employ about half of the private sector workforce. The council says several forces are affecting premiums and access to cover, including natural catastrophe losses, higher construction costs, inflation, and regulatory settings. According to the ICA, extreme weather events since 2020 have generated more than $4.5 billion in insurance claims, while construction costs have risen by about 40% over the same period. The council argues this increases the likelihood that sums insured will not fully reflect replacement costs for property and business interruption policies. It also notes that the rapid adoption of digital tools and online channels has increased exposure to cyber incidents for smaller enterprises, at a time when automated and AI‑enabled attacks by criminal groups are becoming more common.
State-based insurance taxes and levies are identified as an additional contributor to overall costs. The ICA cites data indicating that state governments collected $8.9 billion in insurance taxes in 2024-25, which it says was $1.6 billion more than the general insurance industry’s total profits. Depending on the state or territory and product line, these charges can add between 9% and 40% to premiums. ICA CEO Andrew Hall said the submissions are intended to give policymakers a set of options to address these trends for smaller firms. “Small businesses are the engine room of Australia’s economy, and affordable, accessible insurance is essential to their resilience. These submissions set out a roadmap for practical reforms, from tax relief to better risk education, that can ease costs on small business without compromising protections. Whether it’s the rising cost of extreme weather, the growing challenge of psychological injuries in the workplace, or the evolving threat of cybercrime, these are complex pressures that require government, industry, and small business to work together. We look forward to engaging with the committee throughout this important inquiry,” Hall said.
The ICA’s proposals sit within the Parliamentary Joint Committee on Corporations and Financial Services’ inquiry into the provision, regulation, and pricing of modern insurance products for small businesses and for not‑for‑profit and community organisations. Chaired by Senator Deb O’Neill, the committee is reviewing whether current products and regulatory settings align with contemporary risks and business practices. Its terms of reference cover:
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Written submissions close on March 6, 2026, and the committee is due to report by Oct. 27, 2026. The inquiry forms part of the committee’s oversight of the Australian Securities and Investments Commission (ASIC) in its supervision of corporate, markets, financial services, and consumer credit regulation. While it does not resolve individual disputes, it may use case studies and stakeholder evidence to inform its findings and recommendations.
Within the inquiry, the ICA has highlighted three product areas it regards as central to small‑business risk transfer. For business pack and business interruption policies, which combine property, liability, and interruption covers, the council says construction cost inflation is heightening underinsurance risk. It argues that smaller firms are more likely to underestimate rebuild costs or leave sums insured unchanged over time, particularly for buildings, fit‑outs, and interruption limits. The ICA is advocating for government-funded risk education programs to help small-business owners and their advisers better understand coverage, policy limits, and risk‑reduction measures.
In workers’ compensation, the ICA points to an increasing impact from psychological injury claims. It notes that these claims generally cost more than three times physical injury claims and result in longer absences from work, which can influence scheme finances and employer premiums. The council is urging governments to invest in workplace mental health prevention, address workforce shortages in claims management and rehabilitation, and work toward more consistent rules across jurisdictions to simplify compliance for multi‑state employers.
On cyber insurance, the ICA reports that uptake among small businesses remains modest, despite growing reliance on digital systems and a more complex threat environment. It says smaller entities can face higher exposure due to limited cyber awareness, legacy technology, and constrained security resources. The council is recommending that government expand awareness and training programs, including initiatives such as Cyber Wardens, and share de‑identified data from a mandatory ransomware reporting framework with insurers to support more accurate risk assessment, pricing, and product development. The ICA has indicated it will provide additional submissions focused on public liability and professional indemnity insurance, which are also included in the inquiry’s scope.
The Australian Consumers Insurance Lobby (ACIL) has also lodged a submission to the committee, extending its usual focus on domestic home, motor, and residential insurance to issues in small‑business markets. ACIL notes that while it does not hold the same depth of data for commercial lines, it considers it necessary to draw attention to what it regards as systemic problems affecting access to adequate and affordable cover.
ACIL reports that many small businesses and professionals are facing increased difficulty securing professional indemnity, public liability, and cyber insurance on workable terms. It places particular emphasis on the claims‑made design of professional indemnity policies, under which professionals are covered only if an insurer continues to insure that activity when a claim is lodged. ACIL argues that when insurers withdraw from a sector or introduce broad exclusions for areas such as cladding or defects, professionals can lose effective protection for work undertaken in earlier years, creating a gap in cover and influencing confidence in professional and consumer safeguards.
The submission also points to examples reported in the media where insurers have withdrawn from, or imposed significant restrictions on, coverage for building certification, adventure and leisure tourism operators, camps and caravan‑style accommodation, and alpine tourism and accommodation. ACIL says these developments can lead to business closures or reduced access to services and activities in affected communities.
From a market‑function standpoint, ACIL raises concerns that current risk selection and pricing approaches may result in some risks being effectively excluded from the market. It states that while insurers have commercial drivers, “an insurance market cannot function – nor fulfil its societal purpose – if every individual policy must be underwritten at a profit.” Without endorsing a particular model, ACIL suggests that there are mechanisms that could help stabilise markets where availability is declining. One option it outlines is an industry‑supported underwriting facility or joint agency, co‑insured by ICA members, to maintain cover in segments where market failure is evident, such as certain areas of public liability or professional indemnity. ACIL says such an arrangement would not necessarily be run on a profit‑maximising basis, but could be treated as part of the sector’s broader community role.
On the regulatory side, ACIL calls for a framework that supports systematic monitoring of availability and affordability, early identification of sectors at risk of insurance withdrawal, and tools for industry‑wide responses to persistent problems. It supports stronger transparency obligations and enhanced industry data collection to provide earlier warning of emerging market stress points, in line with ASIC’s mandate. ACIL concludes that pressures in small‑business insurance have significant flow‑on effects for consumers and community organisations. It argues that it is “imperative that the insurance industry accepts part of the responsibility for maintaining accessible and affordable cover – particularly where the withdrawal of insurance threatens economic participation, public safety, or community wellbeing.”
For insurers, underwriters, and intermediaries, the inquiry and the submissions from ICA and ACIL point to closer examination of how small‑business cover is priced, structured, and distributed across key lines. The committee’s final report, due in October, is expected to explore potential changes that could influence state and territory tax settings, risk‑sharing arrangements, data and reporting requirements, and the way liability, property, interruption, and cyber products are configured for smaller organisations.
