Australia’s 2.5 million micro, small, and medium-sized enterprises (SMEs) are being urged to strengthen their insurance coverage as part of risk management strategies, according to Gallagher’s recent Essential Insurance Strategies for Micro-SMEs to Thrive report.
The study, citing QBE’s Adapt, Protect and Thrive: How Micro-SMEs Navigate Risk and Opportunity report, revealed that while 50% of micro-SMEs aim to boost profitability, 43% seek to expand their client base, and 42% are focused on stabilising cash flow, many remain financially vulnerable without sufficient coverage.
Gallagher found that nearly one in four micro-SMEs would be unable to recover from a financial setback without insurance, while 28% could not absorb a loss exceeding $10,000. “The importance of business insurance isn’t just a safety net, it’s a necessity,” the report stated, noting that 81% of insured micro-SMEs felt protected against risks and 79% experienced greater peace of mind.
As these businesses expand, their risk profiles often shift. Gallagher found that 42% of micro-SMEs reported revenue growth in the past three years, yet 59% had not updated their insurance coverage since they began operations. The report warned that such inaction could leave them exposed to underinsurance or gaps in protection as their operations evolve.
One area of concern involves contractor arrangements – 29% of micro-SMEs hire contractors, with 31% of those relying on them for over half of their labour costs. This complexity calls for policies that cover contractor liabilities, new equipment, and operational disruptions.
Gallagher encouraged business owners to conduct regular insurance reviews and consider flexible business insurance packages that align with changing risks. Coverage for premises, equipment, and business interruptions, such as those caused by storms or fires, has been recommended to be prioritised. The report also advised evaluating excess options and comparing policies across providers.
The report underscored the value of partnering with insurance brokers who can identify coverage gaps, eliminate unnecessary inclusions, and secure competitive rates. “Brokers are experts at analysing your business needs so they can identify the most suitable policies,” Gallagher said.
By keeping insurance policies current and comprehensive, the report noted, micro-SMEs can better navigate uncertainties, safeguard their financial stability, and support sustainable growth.
What steps should businesses take to mitigate their risks? Share your insights in the comments below.
