The crisis continues with reports that many Australians who own home-based businesses have been told that this will make their home and contents insurance no longer valid.
insuranceNEWS.com.au understands that Finance Minister Stephen Jones has received preliminary information on the matter from Treasury, and has been in informal discussions with the Insurance Council of Australia.
A detailed consultation, including with ACT Independent Senator David Pocock, who has urged Canberra to act on the issue, is expected after Parliament rises.
Mr Jones has previously said he wants to find “the best possible solution” after it is known that homes and contents are being liquidated or claims are being rejected due to non-disclosure of business at insured addresses.
insuranceNEWS.com.au reached out to six brokers to get their thoughts on the matter.
Allsure Insurance Agency CEO Melissa Donaldson:
Ms Donaldson says her advice to consumers who earn a living from a home business is to talk to an insurance agent, who can help determine if there is a risk that the insurer should be aware of.
He says that every business should have its own cover and there are insurance companies that increase the liability to include the business, depending on what the insurance is doing.
“Use a broker, since you’re not an insurance expert, they are,” he says. “They’re usually less expensive than going direct, and peace of mind is always worth it.”
Even for a hypothetical client who cooks for extra income, they say they need insurance for their business.
“The story comes from the challenges they have from their cooking business,” says Donaldson.
“This is not covered by their home insurance. It would be like having your car in a garage, and your car is uninsured, and the garage catches fire…the car is uninsured, because it’s in an insured garage.”
Director of Ceneta Insurance Services Veronica Kypros:
Ms. Kypros says it would be helpful for all insurers to agree on the definition of a home business. He added that providing clarity is important so that consumers can assess for themselves whether they should disclose their home business to an insurer.
He added that many consumers may believe that their side hustle is a hobby, not a business.
“Clear information about when a habit becomes a business, can help inform consumers to explain,” says Kypros.
Consumers often don’t know there is a problem until they see a scary story in the newspaper. And many take a “head in the sand” approach to insurance, preferring not to disclose what they think could lead to unpleasant facts such as the need to change insurance or pay more.
He’s disappointed many insurers don’t seem to offer any support to home business owners, but says Ceneta has found other insurers that buy them, or insurers that allow them to supplement their general property and contents.
“This is where a broker’s unique knowledge of available solutions can really help the client,” Kypros says.
One of Ceneta’s clients disclosed his business to an insurer, who told him he could keep his current home and its contents “if it was declared and paid for,” he says.
“Not all insurers will accept this, so businesses may need to review the client’s policy if they are informed about the business by the client, and it is not within the insurer’s desire,” said Kypros.
He says it’s important to note that getting home and contents insurance to help you run a home business doesn’t mean the business is covered under the policy.
“The insurance agent can just say they know you’re running your business from home, without damaging your home and its contents,” he says. “Many home businesses will want to have their own personal loans and may also pay for equipment and/or supplies, which must be arranged separately.”
He said the industry has fielded a number of inquiries since home and contents reports were canceled or claims were dismissed because they were not declared to the insured business being conducted on the insured property.
Clients wanted assurances that they were properly covered or were reporting their home business for the first time.
“Businesses would be well-advised to alert home owners of the contents, asking them to contact them if there are any changes in their lifestyle, especially if they have started any home business,” says Mr Kypros.
GT Insurance Brokers CEO Glenn Thomas:
Mr Thomas said times have changed where more people are working from home and mobile, and many are able to use their homes as their home base.
“Insurers need to adapt and adopt this approach when evaluating these risks,” he says.
“Each insurer handles every situation differently and it’s safe to say that the home and its contents are still complex and not everything will fit in a box.”
He admits that the policies of the house and the contents are not designed to harm the business but it can do so and in his mind each insurance owner should know what is in their best interest – either by placing goods, endorsements, or conditions.
“Insurers can put things like if the ABN is there, whether it’s their regular job,” he says.
Mr Thomas says there are some insurers who are suggesting a more general approach to clients with side effects.
He said that the money they pay may not be very competitive in the market, so it is up to the customer to decide if they want to continue the business at home knowing that they now have to pay more insurance.
Insurance House Broking GM Scott Leis:
Leis says the simple fact is, for many customers their needs have changed, and in some cases, home and contents policies alone may not provide the protection they need.
“It highlights the importance of having strong client/tenant relationships and conducting good negotiations, ensuring that we get the right plan for the situation,” he says.
When asked if demand for home insurance products to cover business has increased, he said: “Yes, many of our customers’ circumstances continue to change and this is a very common conversation with them.”
“There’s no doubt that as we move back to ‘new innovation’ foreclosures, it’s very important that our customers are interested in their insurance/program,” he says. This is especially true if their work and lifestyle has changed. It is important to ensure that they, along with their broker, understand the potential risks and the necessary safeguards to protect them. “
They see an opportunity for customers and suppliers to actively engage, educate and understand the importance of good insurance.
“Doing so will lead to risk-based decisions that focus more on protecting the client’s interests, not on reducing costs,” Leis said. “This is a ‘reasonable conversation’ and it is more important than the theory that buying insurance is just shopping.”
MGA Insurance Group Broker Ashley Ward:
Mr Ward said every situation is different and each insurer has its own requirements. He said there is pushback from insurers for customers doing some type of work at home but that is normal.
Debt recovery has been explaining to customers that home policies are not commercial insurance products and as part of the MGA’s investigation of the customer’s insurance needs, questions about their implementation are asked.
“It’s part of the disclosure process,” Ward said. “I think these few incidents have highlighted the importance of talking to your insurer and the importance of talking to a broker to discuss risk.”
Remingtons Insurance Brokers Senior Account Executive Tarah Burgess:
Burgess says there are no insurance policies available to most home business owners, so there is a real difference in disclosure.
The block has been fielding many calls from clients who run their businesses regularly from home and at the moment, there are few solutions available to many because of the type of business they do – which is not office or farm related. .
He said the companies should accept that there is currently no suitable market for consumers under the home business and a solution must be found.
“These companies need to make consumers aware of this and prevent consumers from using home businesses, or change their Home Insurance policies to include these risks, or create a new Home Insurance policy that consumers can buy instead,” Burgess said.
He says it is “unfair” to consumers if they are told their “hardship” – such as fixing computers to earn extra cash – could result in their homes and their contents being removed.
“There is no real difference in coverage, and there is currently no product on the market that someone in that situation can buy to meet their needs there,” he says.
“We have found that there are options that customers can choose from. However, most of the land and work activities are often rejected. With the way the world is changing many homeowners will have problems. This needs to be seriously considered and many solutions implemented. “
When asked if homeowners should be penalized for running honest boxes, he said consumers have a duty of disclosure that they must meet when purchasing insurance.
“However, it is not fair and reasonable for an insurance company to deny a claim on a property that is not related to their business,” he says.