Insurance Crisis for Australian Tobacco Retailers Amid Surge in Arson Attacks

[JohnS]

The following article follows on from our on-going pursuit, here at FoH, of highlighting the consequences of the Australian Government's taxation policy on tobacco products...

Insurance Crisis for Tobacco Retailers Amid Surge in Arson Attacks

Rising premiums and insurance unavailability for tobacconists escalate amid increased arson incidents linked to illicit tobacco trade.

The insurance landscape for shops selling tobacco products has become increasingly precarious amid a string of arson attacks, with brokers indicating that coverage for these businesses has grown 'almost impossible' to secure.

Since early 2024, Queensland police have initiated investigations into at least a dozen arson incidents targeting tobacconists, believed to be interconnected with a broader gangland conflict concerning the illicit tobacco trade.

Jeffrey Forbes, director of Consolidated Insurance Brokers, noted that insurers have started tightening their options for businesses involved in the sale of tobacco over the past 18 months, leading to dramatic increases in insurance premiums.

Forbes cited an example where a commercial property insurance premium, initially priced at approximately $7,000, has soared to over $25,000.

He highlighted how even mid-to-high risk properties that were once deemed insurable at a premium ranging from $40,000 to $60,000 are now being quoted around $220,000.

The consequences of these surging premiums extend beyond the tobacconists themselves; they also affect affiliated businesses.

According to Forbes, increased insurance costs are often transferred to other tenants in shared strata agreements, resulting in significant financial burdens for businesses that are otherwise unassociated with the fire risks.

'That tenant has an absolute right to be there and to operate their shop, but them being there is now potentially costing all the other lot owners thousands of dollars,' Forbes stated.

Ben Tran, who operates a tobacconist franchise in Ipswich, reported that his business has seen insurance costs surge by at least 30 percent.

He mentioned a growing number of peers who struggle to obtain necessary insurance coverage due to these rising costs, which are now prerequisites enforced by landlords.

Tran is exploring cost-cutting measures such as investing in security upgrades to mitigate risks, although he admitted that these measures may only marginally lower premiums without assuring full coverage.

The tobacconist industry is also grappling with declining cigarette sales—a reported 40 percent decrease over the past six months—adding to the financial strain.

Tran remarked on the heightened anxiety among compliant operators in the market, disrupted by illegal activities.

Forbes expressed that the trend is widespread across Australia, with various states adopting differing regulatory approaches yet insurers collectively perceiving tobacco retailers as a uniform high-risk category.

He cited historical precedents such as the insurance challenges faced by tattoo parlours, which were similarly ostracized due to associations with criminal groups.

A representative from the Insurance Council of Australia advised business owners to seek multiple quotes and consider professional brokers to navigate the market changes.

They noted that recent high-profile incidents have influenced insurers' risk assessments when pricing policies for tobacco-related businesses.

The ramifications of these arson attacks extend to surrounding businesses as well.

Estie Dercksen, owner of a South African grocery store in Logan, reported significant damages amounting to over $70,000 in inventory losses and $40,000 in equipment when the adjoining tobacconist was set ablaze.

Dercksen characterized the violent incidents as an ongoing issue, recounting multiple security breaches that escalated costs, noting that such risks have dissuaded her from leasing next to a tobacco retailer in the future.

In Victoria, the situation has been more pronounced, with police confirming over 100 arson attacks linked to gang activities.

In response, Queensland's Taskforce Masher was established to specifically investigate the illicit tobacco trade, leading to inquiries into more than a dozen similar attacks across the state from Logan to Mt Isa.

In May, legislative measures were introduced that impose severe penalties on landlords leasing properties for illicit tobacco and vaping operations, including potential imprisonment and substantial fines.

Source: https://australiatimes.com/insurance-crisis-for-tobacco-retailers-amid-surge-in-arson-attacks