Mutual solutions in a hardening small business insurance market

07 May 2026

The affordability and availability of insurance for small businesses and not‑for‑profits has become a systemic issue across the Australian economy. Appearing before the Parliamentary Joint Committee on Corporations and Financial Services, Melina Morrison, Chief Executive Officer of the Business Council of Co‑operatives and Mutuals, set out how co‑operative and mutual models are already helping groups of businesses manage risk in ways the mainstream market increasingly cannot.  

Speaking to the Committee’s inquiry into small business insurance, Melina emphasised that insurance is no longer simply a cost of doing business. For many enterprises, particularly in regional areas and high‑risk sectors, it has become a prerequisite for participation in the economy itself. 

“Lack of cover prevents businesses from tendering, trading and entering supply chains. Insurance is therefore an essential enabler of economic activity.”  

A shared challenge across industries

The Business Council of Co‑operatives and Mutuals – the BCCM – represents more than 1,800 co‑operatives and mutuals operating across Australia, hundreds of which are owned by small businesses or not‑for‑profits. These include farmers and fishers, independent retailers, plumbers and mechanics, doctors, faith‑based organisations, community housing providers and social care services.  

While the sectors differ, Melina told the Committee they share a common challenge: rising premiums, narrowing coverage and increasing difficulty accessing essential insurance products.

Submissions to the inquiry consistently pointed to systemic affordability pressures, availability gaps in certain insurance lines and an intensifying risk environment driven by climate‑related catastrophes, cyber risks and expanding legal liability exposure.  

Risk pooling is not new – but it is evolving

Melina reminded the Committee that co‑operative approaches to insurance and risk protection are not experimental. They are a longstanding feature of the Australian economy, particularly where businesses face common and well‑understood risks. 

“Another longstanding and proven model of small business co‑operation is insurance and risk protection.”  

Today, these arrangements take several forms. Mutual insurers operate as APRA‑regulated entities. Co‑operative buying groups help members secure group policies from insurers. And discretionary risk mutuals provide risk protection products where members have a right to have claims considered rather than a guaranteed right to indemnity of these, discretionary risk mutuals have grown notably over the past decade in small business and not‑for‑profit sectors.  

“This is because it is flexible and can facilitate innovative solutions, but it must be well‑structured, backed by a real business case. It is not a panacea for every risk.”  

Evidence of growth and sophistication 

Drawing on forthcoming BCCM research, Melina outlined the scale now being reached by discretionary risk mutuals in Australia. 

In the 2024–25 financial year, there were at least 28 active discretionary mutual funds, with a majority less than ten years old. Collectively, these mutuals served around 150,000 members and generated approximately $416 million in gross contributions, growing faster than the general insurance market.  

Importantly, the sector has become more sophisticated in how it manages sustainability and tail risk.

“Nearly all mutuals have some form of reinsurance, and 62 per cent have more than one reinsurance arrangement in place.”  

The BCCM supports this growing sector through its Discretionary Risk Mutuals Forum, which brings together DRM operators to share experience, strengthen governance and engage constructively with policymakers and regulators. Forum members have committed to adhering to the Discretionary Risk Mutuals Principles, Code of Conduct and Good Practices developed by the BCCM following the ASBFEO Discretionary Mutual Fund Review. These principles provide guidance on governance, capital adequacy, disclosure, the exercise of discretion and member fairness, and are designed to promote confidence, transparency and long‑term sustainability across the sector. 

The role of public policy settings

Melina highlighted that policy reform has played a critical enabling role in the development of mutual risk solutions. The introduction of a definition of a mutual entity and Mutual Capital Instruments into the Corporations Act in 2019 has allowed mutuals to raise start‑up capital without losing their member‑owned character.  

“We estimate more than $10 million in start‑up capital has been raised this way for discretionary mutuals.”  

However, she told the Committee that the legislative framework remains incomplete.  

“The most important further reform would be the provision of a permanent asset lock framework in the Corporations Act, drawing on best practice in other jurisdictions.” 

Such a framework, she argued, would safeguard member and public investment in mutual risk solutions and strengthen confidence where government support is being considered.

Mutuals are not a silver bullet 

Throughout her evidence, Melina was clear that mutuals are not a universal answer to Australia’s insurance challenges. 

“Mutuals can mitigate risks and reduce prices in ways an investor‑owned model can’t, but they are not a silver bullet for every risk.”  

Successful mutuals require a genuine business case, strong member commitment and adherence to good governance and risk management practices. Where industries are highly fragmented or risks are fundamentally uninsurable, a mutual solution may not be viable. 

A broader conversation about resilience

The BCCM’s evidence positioned insurance not as a narrow financial product issue, but as part of a broader conversation about economic resilience, competition and diversity in Australia’s corporate landscape. 

Co‑operatives and mutuals, Melina argued, expand the policy toolkit available to governments and regulators by offering consumer‑centric business models that reinvest in risk mitigation, education and long‑term sustainability rather than shareholder returns.  

As the inquiry continues, the BCCM has encouraged policymakers to consider how mutual models can complement, rather than replace, private market solutions in areas where insurance is becoming increasingly unaffordable or unavailable. 

The BCCM’s full submission to the Parliamentary Joint Committee on Corporations and Financial Services sets out this case in detail, including practical examples and policy recommendations. 

Read the full submission: BCCM Small business insurance inquiry.