In remote operations, the gap between the schedule and the loss is measured in distance

Insurance programmes built on metropolitan assumptions seem fine until a regional loss tests them. Trades and materials have further to travel, rebuilds take longer and the sums insured and indemnity periods often don’t reflect that.

What Seroja showed about distance

Tropical Cyclone Seroja crossed the Mid West coast in April 2021 and left more than 2,400 properties needing repair [1]. Eight months later, hundreds of residents were still waiting for repairs, and tradespeople were struggling to find accommodation near the work. Governments funded 30 two-bedroom units and several caravans to house them [1].

The Insurance Council of Australia recorded about 10,000 claims and $408 million in claims incurred from the event [2]. Its chief executive said at the time that destruction in relatively remote locations made it hard for insurers to start repairs, and he listed a skills shortage and COVID-19 border closures among the other causes of delay [3].

Seroja was an extreme event, but the pattern it exposed is familiar to anyone operating outside Perth. Distance changes both the cost and the duration of a loss, and programmes built on metropolitan assumptions price neither.

The sum insured is where distance first appears

Distance is a line item in every regional rebuild. Western Australia covers 32.9 per cent of Australia’s land area [4]. By road, Kalgoorlie-Boulder is about 593 km from Perth, Geraldton about 419 km, Karratha about 1,527 km and Port Hedland about 1,629 km [5]. Each kilometre adds freight, travel and accommodation for the people doing the work, and a valuation prepared on metropolitan rates can miss all of it.

The businesses carrying that exposure are substantial. The state’s resources sector recorded $220 billion in mineral and petroleum sales in 2024-25 [6], and civil contractors, mining services firms, transport operators, machinery dealers and metal fabricators serve the region from hubs including Kalgoorlie, Bunbury, Geraldton, Karratha, Port Hedland and Narrogin. Commercial property owners and strata managers in those hubs insure the buildings these businesses occupy.

Underinsurance is already common across the country. After analysing more than 2,000 property reports, quantity surveyor MCG found industrial property underinsured by 31 per cent on average and commercial and office property by 24 per cent [7]. Those averages cover the whole country and do not isolate remote sites, so the true gap at a regional asset needs measuring site by site.

The shortfall reaches every dollar of a claim. In a case before the Australian Financial Complaints Authority, a business property was insured for $452,000 against a full insurable value of $1,864,646. The property suffered $295,455 of damage. The policy’s underinsurance clause scaled the payout to a proportion of the loss, calculated at 30.3 per cent, and the authority allowed an offer covering 35.2 per cent of the damage to stand [8]. The loss was partial, and the reduction still applied to all of it.

Contractor availability pushes the number higher again. The Housing Industry Association (HIA) recorded a shortage in every housing market and every trade it surveys in the September quarter of 2026, and trade prices rose 6.6 per cent over the year, the fastest annual rate in four years [9]. In March, regional Western Australia posted the most acute shortage of skilled trades of any market the association surveys [10]. The survey covers residential building, but HIA’s economist notes that home building competes with public infrastructure and other sectors for the same skilled workers [10], so the pressure is unlikely to stay confined to residential work.

“One of the major risks facing businesses across the country is the availability of contractors and it is amplified in the regions. Contractor availability is driving up reinstatement costs as well as testing indemnity periods.” Josh Lauren, Managing Partner, SRG Australia

Rebuilding also resets the standard. After Seroja, the Insurance Council’s chief executive used the example of a 40-year-old home that would now have to be rebuilt to withstand cyclones [3]. A sum insured set on the old building can fall short of the cost of the new one.

Time is the exposure that distance stretches

A business interruption indemnity period starts a clock the business cannot control. Many businesses still rely on a 12-month period because it has historically been the market norm. Extended construction timelines, labour shortages and long equipment lead times mean recovery from a major loss can frequently exceed 12 months, particularly in regional Western Australia.

One major Australian insurer’s guidance for small and medium businesses suggests considering a minimum of 24 months in most circumstances, citing site clearance, design and planning applications, rebuild time, replacement of plant and machinery and sourcing stock [11]. The same guidance warns that lengthening the period without lifting the sum insured leaves a business insured for only part of its revenue, and average then applies [11]. There is no universally appropriate indemnity period, but regional and industrial businesses should assess critically whether a minimum of 24 months is warranted, and test the answer through a comprehensive business interruption review.

Single points of failure turn a local loss into a regional one. When ex-Tropical Cyclone Ellie flooded the Kimberley, Main Roads recorded the Fitzroy River Bridge as damaged beyond repair and sections of Great Northern Highway as washed away [12]. The replacement bridge opened on 10 December 2023 [12]. By late April 2023, semi-trailers could use the temporary causeway only between 7am and 5pm, and the road train assembly areas were reserved for essential supply freight [13]. A business that depended on that crossing needed a programme that paid for the wait.

Accurate insurance programmes start with accurate local assumptions. At SRG, we regularly engage independent building valuers and undertake detailed business interruption reviews so that a programme reflects how regional businesses actually operate. The freight routes, contractor availability and recovery timelines in Karratha, Port Hedland and Kalgoorlie differ fundamentally from those in metropolitan Perth, and the programme needs to recognise it. The test of a regional programme is how much it would cost, and how long it would take, to put the business back where it was.

Answering that takes local knowledge: which contractors can reach a site, how freight reaches Karratha compared with Geraldton, and what insurers need to see before they treat a remote risk fairly. It also needs a presence on the ground when a loss occurs, because the first days of a regional claim shape the months that follow. That’s why we launched our Perth office in October: clients managing distant risks need a broker close enough to reach them.

Construction and civil contractors face the same question in their contract works programmes. Plant and materials that arrive quickly in Perth can take far longer to reach a remote site, and delay under a contract carries its own cost. The insurance programme and the project programme need to describe the same job.

“The test of a regional programme is how much it would cost, and how long it would take, to put the business back where it was.”

Many regional Western Australian businesses hold a programme designed for a different geography. The mismatch tends to surface after a loss, when the options are narrowest and the cost of an error is highest. The gaps in sums insured, indemnity periods and dependency cover can be closed before a claim rather than discovered during one.

For CFOs, Risk Managers and Directors responsible for regional operations, the practical question is whether the programme reflects how the business operates in its actual location.

“One of the biggest advantages a business can have before a loss occurs is accurate information. Through independent building valuations and business interruption policy reviews, we help clients understand the true cost of rebuilding and the likely time required to return to normal operations. That insight often proves far more valuable than any premium saving.”

Sarah Micallef, Managing Partner, SRG Australia

When did your business last test its indemnity period against a realistic regional rebuild timeline?