Cutting costs, not cover, in the mining resources sector in Australia

With costs which remain stubbornly low and falling prices for key commodities such as iron ore,

businesses are carefully assessing their budgets with a view to cutting costs.

Common cuts in the mining resources sector in Australia include reducing executive

compensation, slashing travel budgets and reducing staff numbers. Companies also tend to

become more risk averse, divesting non-core assets and only going ahead with the least risky

new projects.

The challenge for companies is survive until the longer term silver linings eventuate – positives

such as the potential for the Philippines, Malaysia, India and other Asian countries to further

industrialise and urbanise. Another highlight is growing demand from Japan for Australian gas.

The expense of insurance and risk management also come under close examination in this type

of challenging operating environment.

However, cuts in these can prove to be a false economy and expose companies to a reduced

ability to gain or maintain investment funding – and, potentially, leave them exposed to liability

that could send them out of business in the event of a disaster.

Instead, it’s worth sitting down with a quality, experienced insurance broker which has been

“around the block” and discussing your options.

If cash flow is an issue, you could ask about “premium funding” – a service which allows

companies to pay monthly instead of annually, with an extra interest charge.

A good broker can also offer additional services to their clients. Examples include injury

management services to help employees return to work more quickly, reducing workers

compensation insurance premiums. Another valuable service is to review tender and contract

documents before you sign them, negotiating appropriate cover.

When it comes to risks, businesses have three options:

transfer the risk via insurance;

take an informed decision to live with the risk in a controlled manner; or

terminate the risk, for example by doing business differently or changing a contract.

Needless to say, the first step is for a business to assess its risks, not just in terms of liability or

workers compensation but also business interruption and the effect the loss of key people (due to

illness, injury, death or resignation) could have on the business.

In addition, there are areas of cover which are particularly valuable in the resources sector

including:

worker to worker liability;

blasting;

removal or weakening of support;

explosives;

compulsory third party (CTP) gap cover;

principals indemnity

cross liabilities

While some insurers exclude these areas, cover can be found for them.

Insurance is essential for any business in the commodities sector, but it is best combined with

thorough crisis planning and rehearsal, so the impact of any major incident can be minimised.

It’s also important for mining resources sector businesses in Australia to be good corporate

citizens, creating a well of goodwill and trust among stakeholders which can be drawn on in hard

times.

Here the author, Zenny Watt, writes this content about "Insurance for Mining Resources in

Australia". If you have any query about services, visit our website

http://www.ebminsurance.com.au/ or feel free to call us on 1300 467 873.