From supply chain issues to chronic labour shortages and the Covid-19 pandemic, New Zealand small businesses have had a tough run with so much disruption in recent years.
And now it seems the NZ small business sector, which generates more than 28% of GDP and employs more than 630,000 New Zealanders, will have to have to deal with customers tightening their purse strings as consumer confidence falls to its lowest reading ever recorded.
Where a score above 100 shows more optimism, the Westpac McDermott Miller Consumer Confidence Index plummeted year-on-year from 107.1 to 78.7 points in July.
With the growing pessimism around the economic landscape, conditions are shifting for business owners across the country.
“New Zealand small businesses are at a crossroads now,” says Jane Mason, Head of Product, Channels & Risk for SME insurance platform BizCover. “It’s important for them to take a step back and futureproof their business before making any rash decisions.”
Silver linings in your business insurance
As a sector, New Zealand small businesses are in a period of decline.
More of New Zealand’s small businesses shrank than grew in 2021, according to CPA Australia’s annual survey of 11 Asia-Pacific economies.
Only 33.2% grew, the second lowest result in the survey, compared to the 41.9% that shrank.
This was after a tough 2020-21 season plagued by the Covid-19 pandemic, which saw more small businesses close than open for the first time since 2012.
And still, all of this was during a time where consumers were relatively confident in their spending habits compared to now.
While these statistics paint a dire picture, there is a silver lining when it comes to the insurance of small business owners.
“During these turbulent times, small businesses may reduce their workforce or contents, and look to move online,” says Mason.
“If your workforce has shrunk or you’ve reduced your premises or contents since the you last reviewed your policy, you could adjust your insurance to better suit its current size – potentially saving you money in the process.”
Avoiding rash decisions
The reason for small businesses looking to downsize can be largely attributed to rising costs and low consumer morale.
With inflation reaching a 32-year high at 7.3%, small business owners are looking at ways to save money.
Mason says that while it’s tough out there and it’s tempting to put your business insurance on the chopping block, this rash decision could have even worse consequences for their business in the future.
“If it’s tough now, imagine what it could be like if a claim was made against you,” she says. “Even if you are found to not be at fault, the defence costs involved could send many out of business.”
Conversely, small businesses that have bucked the trend and grown despite the conditions may need to still consider adjusting the level of cover.
“Businesses that renew their insurance policy without examining their current risk levels run the risk of being underinsured – where you don’t enough insurance to cover your loss,” says Mason.
The bottom line
Small businesses are barely ever stagnant, being prone to growth or decline even during the mildest of conditions.
For small business owners, the essential thing to be aware of is that this change can influence a business’ risk profile.
“Insurance is there to protect you from the current risks you face,” says Mason. “By not giving a business a health check every now and then, these problems could become a lot worse if a claim were made against you.”
“What’s more, doing a review of your insurance could help you save on your premium.”
*This information is a general guide only and does not take into account your objectives, financial situation or needs. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this article is general only and should not be relied upon as advice. BizCover Limited is owned by BizCover Pty Ltd (ABN 68 127 707 975)
