Too many small businesses and householders aren’t taking out insurance or are underinsured, according to an ICA survey.

Based on the most recent Australian Bureau of Statistics data, the survey found a sixth of small businesses and a quarter of householders in NSW are likely to seek government assistance when disaster strikes because they have not insured their properties.

It found 70% of tenants and 20% of homeowners don’t insure their household contents. “This result is surprising considering that NSW suffered some of the worst bushfires on record less than 12 months ago and the fact that the bushfire season has been declared early this year,” ICA Executive Director Alan Mason said.

While the 2002 survey shows a marginal improvement on previous surveys, it said that approximately 1.8 million Australian households and almost 200,000 small businesses are still not insured.

The survey also found that many people failed to take up insurance due to the high cost. Mr Mason said affordability is a major factor when people consider buying insurance, and the high level of taxes imposed on insurance premiums has contributed to the high cost.

He said NSW has the second highest level of taxes on property insurance in the world, behind Victoria. “The cascading effect of the Fire Services Levy, Stamp Duty and GST has added over 30% to the basic household premium and almost 50% on business property insurance,” he said.

“This is a particular disincentive for small businesses which pay around $500 tax on top of a $1000 premium.”

The survey also found that more than 70% of uninsured or underinsured businesses which suffer a major loss by events such as fire, fail within the following year.

“The impact of a business failure extends beyond the owner and immediate employees to suppliers, creditors and others associated with the business,” Mr Mason said.

But he added that it doesn’t take a natural disaster to cause destruction. “Most insurance claims result from individual events which, unlike declared disasters, don’t attract government-funded appeals.”

Mr Mason said recent bushfires and the current fire warnings in Sydney were a “timely reminder” for householders and business owners to ensure they are fully insured.