For Australia’s start-up and micro-SME sector, insurance typically sits at the bottom of the to‑do list, well behind product development, cash flow and winning those first few customers. Protection is often treated as a “later” problem, only addressed when a landlord, major client or investor demands proof of cover. That neglect has left a large pool of founders running uninsured or badly underinsured – and created a clear growth runway for brokers who can package simple, relevant cover and risk advice for businesses at this earliest stage. It’s a blind spot with real consequences: analysts warn that many SMEs remain uninsured for critical exposures such as cyber and that the long-term economic cost of underinsurance in this segment could run into the billions of dollars.
The problem is not confined to pure-play tech start-ups. Traditional “Main Street” businesses – cafés, bakeries, candle shops – now operate online, store data and depend on digital platforms, yet often still treat insurance as a tick-box item behind rent, wages and marketing.
Ben Webster from specialist insurance brokerage Pocket, said his own experience mirrors that pattern. When he founded a website firm in 2007 he only bought cover when a major client demanded proof of insurance before signing a contract. That external trigger behaviour is the rule, not the exception for SMEs. “They go, I'm not going to get insurance until I need it,” said Webster.
Industry research reinforces that SMEs systematically underestimate their exposure, particularly cyber. In Australia, many smaller firms mistakenly assume low cyber risk because they do not handle large volumes of personal or health data, despite growing ransomware and business interruption exposures.
At the same time, the focus for many brokers and insurers is often established firms and this tends to miss these smaller SMEs and start-ups. “I don't think brokers and insurers are getting it wrong. I just think they optimise for scale and risk, which makes sense for their business model, right?” Webster said.
The contemporary commercial insurance model is built around efficiency: larger premiums, repeatable programs and standardised wordings that can be processed at volume. That works well for mid-market and corporate clients, where the risk sophistication and premium pools support deeper advisory relationships.
But that same model struggles when a founder is turning over a few hundred thousand dollars, has no in-house risk expertise and is buying cover reactively to secure a lease, hire their first employee, or satisfy a procurement requirement.
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Proposal forms, especially in areas like cyber, remain highly technical. Webster noted that even as a “geeky” insurance insider, he finds himself Googling terms in some cyber proposal forms. For a first-time founder who does not even realise they have meaningful cyber exposure, that complexity quickly becomes a barrier to entry rather than a pathway to protection.
Brokers who lean on dense PDSs, exclusions and jargon to manage their own risk can inadvertently alienate the very clients who most need guidance. As Webster observed bluntly: “And so sometimes they use complexity like a comfort blanket.”
The result is a large population of small, emerging businesses – including those in the digital economy – who either remain uninsured or carry only the bare minimum mandated by counterparties, with little appreciation of their broader risk profile.
The opportunity for brokers lies in rethinking distribution, not in reinventing the core value proposition. Webster is clear that “all good broking depends on relationships,” but those relationships now need to extend beyond traditional chambers of commerce and small business associations into the ecosystems where start-ups and micro-SMEs actually gather – meetups for tech founders, coding communities, co-working hubs and online founder forums.
At the same time, brokers need to simplify the conversation. GlobalData’s UK SME survey found that 26% of SMEs bought cyber insurance because a broker advised them to do so. This underscores – for Australia’s market too – how powerful clear, trusted guidance can be in this segment. Tools that translate technical vulnerabilities into business-language outcomes – downtime, lost revenue, reputational damage – are already being used by some specialist providers to help brokers close the cyber protection gap.
Read next: Is cyber awareness rising enough?
For brokers, the commercial logic is straightforward. Founders might start with minimal limits and a narrow set of covers – for example, basic liability and cyber – but if their first experience is transparent, relevant and painless, they are likely to keep that broker as they scale. Over time, those micro accounts can grow into substantial programs across property, liability, management liability and specialty lines.
Webster argues that the key is to help businesses build “fit for purpose” programs at each stage – starting out, scaling and then protecting a more mature enterprise – rather than trying to sell them a full corporate solution on day one.
If the industry is prepared to invest in those early-stage relationships, the underinsured start-up of today could become the well-protected mid-market client of tomorrow. The alternative is a long tail of fragile, uninsured SMEs – and a major growth opportunity left on the table.
