RISING insurance costs for the shipping industry are taking money away from community groups.
EES Shipping Managing Director Brian Hack says community sport is the big loser as businesses struggle with increasing insurances.
The head of the family-owned freight forwarding company says businesses have less cash for donations and sponsorships as a result of increased insurance costs.
Mr Hack says the cost of his various business insurances have risen substantially in the past few years, and now represent a significant proportion of overall business costs.
“Of the six main types of insurance we have in the company, five of those have increased more than 10% in the past two years alone. Vehicle insurance in particular is up more than 20%, and we’ve not even made a claim.
“We’re now spending almost $100,000 annually on insurances, which is not only a significant cost to the company, but it’s also money that is not being spent on staffing and business development.
“That then becomes a commercial decision we have to make; do we pass some of those increased costs onto our customers or do we absorb it? Unfortunately, we, and many other businesses out there can no longer simply keep absorbing such significant hikes.”
Mr Hack says his company has building, business, vehicle, travel, workers compensation and cyber insurance.
While not all are compulsory, he says dropping insurance isn’t a risk his business is willing to take.
“If we look at cyber insurance for example, we don’t legally have to have it. But in our increasingly digital world, and with the continued instances of hacking and data theft, it’s a necessary protection for us as a business, and by extension for our customers.”
Instead, Mr Hack says he’s constantly reviewing company costs to budget for anticipated rises in insurance premiums, and looking for areas to reduce spend.
“What this means is that we have less to spend on things like donations and sponsorships for local community groups.
“While we currently sponsor two local sporting clubs and an overseas charity, we don’t have capacity to give more, even though we’d like to.
“I have no doubt there are companies out there now who aren’t sponsoring any local groups at all, purely because there’s nothing left to give.
“That’s tough on those local businesses who want to give back, but it’s also really tough on local clubs and organisations that rely on those sponsorships.”
Mr Hack says with premiums continuing to rise he expects to see a rise in underinsuring. In order to avoid a hefty insurance premium hike, Mr Hack says he’s heard of instances where the value of the insurance is understated.
“People might see it as a way to avoid paying more, but it’s a dangerous risk to take as if you need that policy you won’t be covered for the true cost and you could end up out of pocket down the track.”
Businesses may decide not to take out insurance. While it’s a risk EES isn’t willing to take, Mr Hack says unfortunately some people choose to run the gauntlet and opt for no insurance.
“We’ve seen this play out for clients in the past, unfortunately, where they’ve opted for no shipping insurance and their shipment has ended up damaged. Insurance for importers can be an added expense, but it’s there for a reason.”
Mr Hack says shipping-related insurances have risen in recent times as a result of various geopolitical tensions – such as attacks in the Red Sea.
“Once again this is a cost that flows right through the supply chain – if it’s costing more to insure goods heading to Australia, plus then businesses are paying more for their various insurances to actually run the company, that’s going to result in higher costs for the consumer.”
