Small Business Insurance Trends 2025

Insurance is often a must-have when you’re running your own business. Whatever the nature of your enterprise, insurance is there to help you bounce back after an accident or incident.

Understanding the trends that are affecting the insurance market can help you with your broker select the type and level of cover that’s right for your small business.

Here’s some of the insurance trends you need to be across in 2025.

Broader cover, higher excesses

Australia is known as the land of fire and flooding rain. The increasing frequency and severity of natural disasters is prompting small businesses to review their climate risk related policies and, in many instances, extend their cover. That can be an expensive affair, which is why many owners are mitigating the cost of by opting for higher excesses on their various policies.

If affordability is a challenge, this approach can help you manage the impost while remaining covered for existing and new risks.

Seeing cyber as an existential threat

While they may not result in actual property damage, cyber events can be every bit as disruptive and expensive as natural disasters.

The average cost of a small business cyber-crime incident is now $49,600, according to the Australian Signals Directorate’s Annual Cyber Threat Report 2023-2024. And the risk of falling victim has never been higher.

Business owners have become alive to the threat and are increasingly willing to mitigate it with Cyber Insurance cover.

Traditionally this cohort would be more concerned about the threat of a fire insurance claim to their property, but they now perceive cyber-crime as a far more likely occurrence.

Understanding Directors and Officers (D&O) Insurance

Running your own show can be exciting and rewarding, personally and financially, but it’s not without its risks. There’s lots that can go wrong and if it does the buck usually stops with you and your fellow owners and directors – figuratively and literally.

Should a supplier, customer or employee decide to take legal action against you personally, you could find yourself in for a protracted, stressful and expensive battle to protect your personal assets and the security you’ve worked hard to build..

Directors and officers (D&O) insurance, known as Management Liability Insurance in the context of small and medium-sized businesses, is recommended by small business specialists and advisers who’ve seen small business owners struggle to recover from litigation they’ve failed to prepare for financially.

And it’s not just directors of commercial enterprises that can end up in hot water – directors of not-for-profit organisations may find themselves similarly exposed, should something go wrong.

Management Liability – What’s covered?

A Management Liability Insurance policy can cover you for liabilities and legal costs associated with defending claims against you made by third parties, for allegedly wrongful acts you’ve committed in your capacity as a director or officer.

Available from most major insurers, Management Liability cover can provide protection for executive directors, non-executive directors, company secretaries and other members of your senior management team for acts they perform, or fail to perform, while working in those roles.

If, for example, a manager responsible for workplace health and safety is alleged to have failed to mitigate risks adequately and an employee who’s incurred an injury decides to sue them, the Management Liability insurer may cover defence costs and damages.

Management Liability – What’s not covered?

What Management Liability Insurance won’t cover are the costs associated with any act, omission or issue that arose before your current policy was taken out and which you knew, or should have known, was likely to trigger a claim.

Other typical exclusions include fraud, illegal and personal profits and gains, fines and penalties that can’t legally be insured against.

These policies do not cover your own fraud, but they may cover you for loss suffered as a result of fraudulent acts by some other person.

Management Liability – Mitigating the risk

Management Liability cover can be complex and working with an experienced broker can help you find a policy that meets your needs, according to Steadfast broker technical manager Michael White.

“Analysing the size, structure and scope of your organisation along with its circumstances and risk profile will help determine the level of cover that’s appropriate for you and your leadership team,” White says.

“Protecting them and yourself from some of the risks associated with business leadership in today’s times can provide the peace of mind that allows people to do their best work.”

If you’re the director of a small business or considering becoming one, it’s a good time to explore the benefits of Management Liability Insurance, or to review your level of cover to see if it remains right for your circumstances.

Banding together to access better cover

Climate change is making it harder for small businesses situated in high-risk areas to gain access to cost effective cover, with those in parts of northern Australia particularly hard hit.

Banding together to seek better prices and conditions can help them gain access to the protection they require.

“Expect to see more businesses looking for alternative ways to manage this risk,” Mathieson predicts.

Seeking expert advice

No two small businesses are the same and nor are their respective risk profiles. An experienced insurance broker can help you identify the vulnerabilities and emerging risks yours faces.

“It’s crucial to stay informed and to work with a qualified professional insurance broker to develop tailored risk management solutions beyond just insurance,” Mathieson says.

Drawing on the expertise of a broker who is familiar with your industry can help you get a handle on your evolving risk profile, and a growing number of Australian SMEs are seeking out this specialist assistance.

“Find someone who specialises in your industry or occupation and who can understand what you’re up to from day to day in your business,” Mathieson advises.

Cover when it counts

The right insurance cover can help to protect your small business from a range of adverse incidents and events. An insurance broker can help you determine what type and level of cover will best meet your needs. If you’d like to review your current policies or chat about your requirements, contact us today.