The report, commissioned in partnership with SGS Economics, analysed natural disasters' acute economic and social impacts on small businesses and their communities, and the role of insurance in supporting recovery and building resilience.
IAG found that, on average, between 65% and 72% of the total economic impact from the Townsville floods in 2019 and black summer bushfires in 2019-2020 were attributed to small businesses. Specifically, the Townsville floods' economic impact was a $2.5 billion reduction in GDP, with the impact on small businesses estimated at $1.5 billion. Meanwhile, the black summer bushfires' economic impact was around a $2.7 billion reduction in GDP, impacting businesses in New South Wales (NSW), Victoria (VIC), South Australia (SA), and Queensland.
Read more: IAG on addressing climate challenges
As Australia remains vulnerable to extreme weather events, how can we make small businesses – considered the country's largest employer engaging over 4.7 million people – more resilient?
The report recommends the following:
- The government must prioritise and invest in mitigation strategies to reduce natural disasters' impacts on regional and rural Australia;
- Small businesses must conduct a thorough disaster risk analysis to understand location hazards and natural peril risks and insure accordingly;
- Households must increase understanding of risks, regularly assess dangers to their environment, and acquire insurance to meet their specific needs; and
- Governments must inform and educate communities on the increasing risks of natural disasters and articulate the need for small businesses and households to be adequately insured to expedite immediate and long-term economic recovery.
“We know natural disasters will continue to increase in prevalence due to a warming climate,” he said. “Research shows that a dollar spent on mitigation can save at least two in recovery and reconstruction costs. It's critical that we now see governments identify and invest in mitigation activities, as well as stronger building codes and improved land use planning.”
Find out more about IAG's sustainability goals and initiatives in an Insurance Business TV (IBTV) interview with IAG executive general manager (safer communities) Ramana James.