“Profit is very different from turnover. You may get people coming in expecting half a million [in cover] across 12 months and getting much less,” he said.
“The person is quite often incredibly traumatised if claims have gone off track and at that point and they feel like it’s them against this massive company.”
The warnings come as the federal government extends financial counselling services for businesses affected by natural disaster while the Australian Financial Complaints Authority has set up a dedicated bushfires support unit.
AFCA said it expects complaints to flow through several months after bushfire conditions subside.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said while most Australian operators had policies in place for business disruption, the next few months would test of how these policies covered companies when they suffered loss of tourism or other indirect impacts due to fire conditions.
Dispute resolution with insurers can take months and Ms Carnell urged insurers to be reasonable in their assessments for those indirectly impacted.
“The problem here is the time-frames on it — these people need the money now and in the forseeable future. For a [policy] complaint to be investigated, it’s going to take six months, and therein lies the problem.”
Ms Carnell predicted the insurance implications would extend well beyond this fire season, given costs for this type of cover will likely increase.
“The great dilemma will be what the cost will be going forward, and it’s something that it’s important the government keep an eye on.”
Tourism operators are pessimistic that accommodation operators will have the cover they need.
President of the Victorian Caravan Parks Association Steve Bartlett said he expected many park operators outside the designated state of disaster areas of East Gippsland and Towong may struggling to survive the summer.
Insuring tourist parks was becoming increasingly expensive even before 2020’s fire season, he said.
“The scope of the policies is being reduced, and the cost of the policies are being increased with reduced benefits.”
The Insurance Council of Australia said “loss of attraction” insurance was common though many operators may not have anticipated the types of loss they would incur.
“There are business owners who may not have researched or understood possible risks to their business and trade and will realise that the business interruption insurance they have may not apply to their current circumstances,” a spokeswoman said.
Insurer CGU, which covers a variety of caravan park operators, said business interruption insurance covered companies when they lost power, had access to their premises blocked or damaged.
“We’re urging all our customers who have been impacted to contact as soon as possible so we can support them during this difficult time,” a spokesperson said.
Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.