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Australia's business landscape is dominated by micro, small and medium-sized enterprises, which represent nearly 2.5 million businesses1. Insurance plays a critical role in providing confidence and security to support micro-SMEs2. The QBE 2025 report, Adapt, Protect and Thrive: How Micro-SMEs Navigate Risk and Opportunity, surveyed over 1,000 sole traders and SME owners to explore their perspectives on challenges, market shifts, and growth opportunities.

The findings reveal that, while business goals vary, 50% aim to increase profitability, 43% want to expand their client base and 42% prioritise stabilising cash flow — insurance remains a key enabler for achieving these objectives.

Why micro-SMEs can't afford to overlook insurance

Against a changing economic landscape marked by rising inflation, fluctuating supply chains and shifting consumer preferences, micro-SMEs reported they are managing these risks with resilience and diversity — with 40% streamlining expenses, 38% building savings/ financial reserves and 25% diversifying their offerings.

However, the financial vulnerability of many micro-SMEs is stark: the survey reports without business insurance, 24% of micro-SMEs couldn't afford a financial setback, while a further 28% couldn't manage a setback of more than $10,000.

With the costs of disruptions like equipment damage or legal liabilities often exceeding these amounts, the importance of business insurance isn't just a safety net, it's a necessity. Business insurance provides tangible benefits:

  • 81% of insured micro-SMEs feel protected against risks
  • 79% experience peace of mind
  • 53% feel more confident taking financial risks, enabling innovation and growth.

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Why micro-SMEs need to regularly review insurance coverage

As micro-SMEs grow and evolve, so do their risks. The QBE report highlights that as micro-SMEs work towards ambitious goals like expanding their service offerings or increasing revenue, there's a growing need for insurance solutions that can scale with their operations and provide robust, flexible coverage as their needs evolve.

For example, nearly one-third (29%) of micro-SMEs employ contractors and for 31% of these, contractors account for more than half of their labour costs. This adds complexity to micro-SMEs' risk profiles, making it crucial to have insurance solutions that cover contractor liabilities, as well as new equipment and operational disruptions.

Growth often brings new risks: larger projects, additional staff or new assets that current policies may not cover. One example is public liability insurance, which can have limit caps up to $20 million — but some contracts require more.

Despite 42% of micro-SMEs reporting revenue growth in the past three years, 59% have not updated their insurance coverage since inception, leaving them vulnerable to underinsurance or gaps as their operations change or expand.

What to consider when reviewing insurance for a micro-SME

Regularly assessing insurance coverage ensures it aligns and evolves with changes in the business. Here are some key factors to consider:
  • Business insurance package cover: offers the flexibility to add to coverage for different risks, without paying for extras you are unlikely to use.
  • First time business owners: prioritise insurance that protects against early-stage risks, such as unexpected legal or operational disruptions.
  • Premises and fittings: if you work from a shopfront or office, building and contents insurance covers physical damage to your premises and the equipment inside.
  • New equipment: check for coverage that extends to include additional business purchases over time like laptops or tools.
  • Unexpected disruptions: such as storms or fires can force you to close temporarily. Business interruption insurance offers cover for loss of revenue and essential expenses for a nominated period for specific disruptions.
  • Excess options:consider whether reducing excesses to minimise claim costs or increasing them to lower premiums aligns better with your financial strategy.
  • Explore options across providers and policies as there are a wide range of choices: an insurance broker will provide this as part of their service.
By keeping insurance policies up to date, micro-SMEs will be better equipped to navigate risks and safeguard stability and growth.

The value of partnering with an insurance broker

Navigating the complexities of insurance can be overwhelming and time consuming. Brokers are experts at analysing your business needs so they can identify the most suitable policies. They can spot gaps or unnecessary inclusions that you might miss, ensuring you're neither underinsured nor over insured.

They also have access to a wide industry network of insurance products and providers, allowing them to find the optimum coverage at the most competitive rates, saving you time, money and stress.

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Sources

1 ABS Counts of Australian Business, Table 13a, August 2024

2 Adapt, protect and thrive: How micro-SMEs navigate risk and opportunity, QBE, February 2025

Disclaimer

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.

Gallagher publications may contain links to non-Gallagher websites that are created and controlled by other organisations. We claim no responsibility for the content of any linked website, or any link contained therein. The inclusion of any link does not imply endorsement by Gallagher, as we have no responsibility for information referenced in material owned and controlled by other parties. Gallagher strongly encourages you to review any separate terms of use and privacy policies governing use of these third party websites and resources.

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