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Queensland businesses still affected by 2011 natural disasters reveal bank, insurer ‘let-downs'
Queensland's forgotten businesses, still dealing with the aftermath of the 2011 floods, may have initially been helped by their banks and insurers but now in many cases find themselves let down by insurance and ‘surcharged' by their banks.
Business Acumen research has found many cases of insurers providing little information for many months before delivering ‘the bad news'. One business owner felt it was a tactic by his insurer to let the issue "go out of the spotlight" so this common practice received no media coverage.
Several businesses that have been denied assessments so far, a year on, could still go to the wall. But business owners are reticent to go public while the issue is still in negotiation as they fear a backlash from their insurers and banks, with loans usually needing to be secured by business insurance.
Several business owners have found that selling assets to reduce monthly outgoings has been exploited by their banks insisting on early payout fees on leases - and in most cases this has amounted to payments of thousands of dollars.
"You do the right thing, at their advice, and sell vehicles and things to reduce outgoings -- and you get slugged by the bank over and above," said one business owner who did not want to be identified for fear of recrimination. His early payout figure on vehicle sales totalled more than $10,000.
"It stinks," he said. "We are forgotten now."
Chamber of Commerce and Industry Queensland (CCIQ) research has shown that many Queensland businesses are still significantly impacted by the natural disasters of early 2011 - and many have been let down by their insurers after very lengthy periods of assessment.
In the CCIQ report, Six Months on from Queensland's Natural Disasters, CCIQ indicated that three out of five businesses which made an insurance claim were still waiting for the claim to be settled. CCIQ's new ‘one-year-on' analysis revealed that as time went on more businesses discovered that they had been more greatly affected than they had initially anticipated.
The results confirm the concerns of a survey in February last year by CCIQ that warned job losses from the floods in the longer term would be significant and many businesses would struggle to recover without sufficient support from authorities and insurers.
CCIQ's initial survey in late January 2011 found one in five businesses in Queensland had to close as a result of the floods due to full or partial water inundation, loss of power or being cut off from their business. The average number of days businesses were forced to close was eight and the average number of days before a business returned to normal operations was 31 days.
The loss to property including plant and equipment, stock, buildings and motor vehicles to those businesses directly affected by the floods was on average $589,000. In the months following the natural disasters, businesses were experiencing difficulty finding out from their insurers where they stood in terms of claims and subsequent results have shown insurers have taken many months to deliver new - especially bad news.
CCIQ president David Goodwin said one of the key findings following the natural disasters was that businesses did not have to be directly impacted by the floods to have experienced a significant and serious financial impact. Furthermore, a noticeable trend was that as time progressed, more businesses came to the realisation that the indirect impact of the floods on revenue had been much greater than first anticipated.
There are also a number of outstanding issues that continue to impact on many businesses, particularly unsettled insurance claims.
For many businesses, the indefinite delay in claim payouts has effectively resulted in being non-insured in terms of ensuring business viability.
Overwhelmingly businesses have also indicated a need for a standard definition of flood, insurance policies that are clearly and plainly written for ease of understanding and the need for earlier payouts with the introduction of a fixed period for assessing claims.
Queensland businesses generally gave positive feedback to CCIQ on the assistance provided by the State Government. The primary assistance measures accessed by businesses were the $25,000 Special Disaster Assistance Grant and deferral of both State and Federal Government tax liabilities.
However there were a large number of both directly and indirectly impacted businesses who are critical of their ineligibility to access any government assistance.
CCIQ stressed the importance of the State Government learning from their experiences to ensure a quicker recovery for businesses and the economy in the event of future natural disasters.
BDO partner Marita Corbett said that all Queensland businesses needed to proactively review their insurance, financing and operational systems.
"For many businesses waiting more than six months for an insurance claim to be settled could be the last straw," Ms Corbett said. "The aftermath of the floods and Cyclone Yasi demonstrated that many Queensland businesses were unclear as to what aspects of their business were covered by insurance.
"Business owners need a clear understanding of their insurance cover, both for physical assets and any loss of profits or business interruption. If you are not 100 percent sure, now is the time to contact your insurance broker or insurer. Don't wait until you have to make a claim."
According to Ms Corbett, business recovery plans should be reviewed on a continual basis to reflect ongoing changes in internal and external environments.
"Many businesses reviewed their business recovery plans directly after the floods but probably haven't looked at them since," she said. "Simple elements can bring down a plan if not continually updated and tested.
"Businesses need to update their database of contact numbers of key personnel, particularly in a mobile workforce.
"Do they know the location of all their critical contracts for services that may be relied upon during the disaster and recovery phases?
"Testing strategies in simulated environments can provide a valuable insight into how they may perform in a real-life situation.
"There is a cost involved in testing your business recovery plan. But what might be the cost to a business if its recovery plan remains untested and then fails during a time of disaster?"
* More on this issue in the February edition of Business Acumen magazine. Subscriptions: www.businessacumen.biz
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