Underinsured & Overexposed

Whenever a major loss event happens in Australia – hailstorms, cyclones and bushfires are amongst the most common examples – it’s only a matter of time before heart-wrenching stories emerge of the devastation experienced by uninsured households and businesses.


Whenever a major loss event happens in Australia – hailstorms, cyclones and bushfires are amongst the most common examples – it’s only a matter of time before heart-wrenching stories emerge of the devastation experienced by uninsured households and businesses.

But arguably even worse are the stories of those who thought they were adequately protected but weren’t. In other words, those who were underinsured.

What is underinsurance?

When an individual or business has inadequate insurance to cover their legal liabilities or the full cost of loss or damage to their assets.

The numbers are alarming!

Australia has long been considered one of the most underinsured nations in the developed world. A study conducted by one of the country’s largest insurers, QBE, in 2019 suggested as many as 62% of all Australian small to medium enterprises were likely to have inadequate insurance.

The same study also found 87% of small business owners felt a major business liability claim had the potential to put them out of business, or at the very least cause them to lose significant revenue or dry up their cash flow.

A separate report from the Insurance Council of Australia found that 26% of SMEs are operating with no form of general insurance – including a whopping 40% of sole traders.

Why are so many underinsured?

There will always be some businesses that actively choose not to have insurance. However, the data shows there’s also a significant portion of underinsured businesses who have made no such choice and don’t even realise it. Typically, we find these tend to be businesses that choose to ‘go it alone’ and aren’t partnering with an insurance adviser. Perhaps they’re not fully aware of the risks they actually face? Maybe they’ve underestimated their sums insured should a loss event occur, such as repair or replacement costs for buildings, vehicles, stock, and other assets that have appreciated considerably in value? Have they accurately factored in the bottom-line impact if their business operations were interrupted for weeks, or possibly even months, on end?

Always know your cover.

They say ‘ignorance is bliss’. But when it comes to being underinsured, it’s to be avoided at all costs. Knowledge is everything.

Our very strong advice is:

  • take the time to review your risks at regular intervals
  • understand the details of your cover, and
  • take whatever steps are necessary to ensure you are – and remain – one of the 38% of Australian businesses who are adequately protected.

After all, you can never be overprepared when it comes to underinsurance.

The material contained in this article is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act or rely upon any information contained in or implied by this article without seeking appropriate professional advice which relates specifically to his/her particular circumstances. iMed Insurance expressly disclaim all and any liability to any person, whether a client of iMed Insurance or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this article.

iMed Insurance is a Corporate Authorised Representative of Insurance Advisernet Australia Pty Ltd.

AFSL No. 240549 - Corporate Authorised Representative No. 1260321

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