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Under Insurance: a case study
5 February 2009
Before organic food storeowner Joe Bazouni was put in touch with an insurance broker he had no idea that his basic insurance cover may have caused him to lose everything he had worked so hard for.

The owner of Joe’s Organic Markets in Alphington, a suburb of Melbourne, had business insurance from a direct insurer and was covered for fire and damage, burglary, glass, and public and products liability and paid $5832 a year in premium. He did not have business interruption cover.

But it was not until Insurance & Risk Professional, the magazine of the National Insurance Brokers Association, arranged for a meeting between Mr Bazouni and a local broker that he realised just how underinsured he was.

Until that day the small business owner wasn’t even aware that he could afford to consult a broker. He’d been buying his insurance from a call centre, and it was costing him hard-earned money.

The broker discovered Mr Bazouni’s stock and contents were grossly underinsured. He had cover of just $10,250 for business contents which included four fridges, a cool room, shelving, fixtures, kitchen appliances, surveillance cameras and computer equipment.

He also had an unregistered forklift – which can only be used on the property and is included in the contents insurance – and he did all the renovations himself so roof materials and floors were also included in the cover. He also lacked some legally required cover.

There was also a co-insurance clause in Mr Bazouni’s policy wording, meaning he would only be paid 15% of the claim if the insurer determined he was underinsured.

Underinsurance is a chronic problem among Australian small and medium enterprises (SME).

Research by one insurer has found 65% of small businesses in Australia have no business interruption cover while 47% do not adequately insure their stock and contents.

The Insurance Council of Australia also estimates 26% of SMEs do not have any insurance – and the figure is even higher for sole traders at 40%.

In the 10 years Mr Bazouni had held his insurance policy, the most contact he had with his insurer was an annual phone call asking whether he wanted to renew the policy or change his cover.

A representative from a direct insurer said when he deals with business clients, only four in 10 choose business interruption cover, while most ask for the cheapest policy.

Through his extensive contacts the broker managed to provide Mr Bazouni with a quote for insurance that far surpassed what he had – and for just $5467 a year.

He is now insured for $700,000 for material damage, including cover for burglary, equipment breakdown, glass, landscaping, money, sign writing and removal of debris. The policy also includes business interruption cover and general and products liability.

Mr Bazouni’s case is proof of how brokers can help their clients avoid financial ruin.

Talk to us about reviewing your insurance cover. It only takes a small accident to destroy a livelihood.
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