NIBA / Special Feature
Doing the right thing by you – and your client Of course, selling vapes (bar prescription vapes) in Australia is illegal, and brokers and clients have a duty of disclosure. “You're bound by the insurance contracts Act, and if you place that risk knowing that there is a potential non-disclosure argument awaiting, the knock-on effect is catastrophic for everybody,” says McEnery. The claim may be denied because of non- disclosure. You must act in good faith. So if you're aware of a shop selling vapes, you need to have that difficult conversation with the insured as avoidance can create a serious problem for everyone involved down the track. “I have been advised of at least one client who came to a financial arrangement with a tenant on a long term lease to encourage them to stop selling tobacco, this can reduce the chances of being targeted, so there are a number of proactive potential avenues to consider.” Given that the sale of vapes is illegal, insurance companies aren’t going to insure that risk, because there’s only one place the product is coming from.
For the uninitiated, the lowdown is this.
consider in terms of how you strategically manage and guide your client. Firstly, it’s essential to ensure clients who own commercial premises are aware of recent developments, says McEnery – and you’ve checked the risk yourself, if there are concerns. “Brokers genuinely need to understand their risk. We have seen examples of gift shops, convenience and confectionery stores selling illegal cigarettes and vapes – or even if they are not, they could become a target for gangs.” “If a client advises the broker that, ‘I've got a commercial block with five properties on it, and one of them is a ‘gift shop’, many brokers are now going the extra mile and making sure that they understand what is on sale in that store before they go to market to get these risks placed.” “It’s important not to have the wool pulled over your eyes. Brokers are saying, ‘the client told me it was a confectionery store.’ Next thing you know, it's up in smoke.” And getting that risk placed is becoming increasingly difficult, with much of the local market withdrawing cover – meaning brokers are having to pivot to London and build new relationships there.
The government’s well-intentioned huge excise increase on legal cigarettes has seen an influx of illegal tobacco entering the country through criminal gangs. The ban on vapes has, somewhat predictably, seen an influx of illegal vapes entering the country through criminal gangs too.
They need a route to market, and shopfronts are it.
Traditional tobacconists, convenience stores and gift stores are among those being strong-armed by criminals and forced to sell the illegal smokes and vapes.
If not, there’s a hefty price to pay.
“We have seen a significant number of arson attacks on these types of shops, particularly in Melbourne,” says Colin McEnery, Major Loss Client Director of Sedgwick. That’s a direct result of shop owners disobeying orders, or rival gangs selling on each other’s turf. Either way, it’s a huge problem for all retailers – the risk of getting caught in the crossfire is very real – and commercial retail unit owners can be the biggest loses if they do not know what products their tenants are selling. Which is where that need for strategic advice really comes in. McEnery says, “If you have smaller commercial property block with six or seven units for example, you might have a sports store, a small jeweller and a book shop… if you’ve got a tobacconist in there, your premium could have gone up from around $30,000 a year to $250,000 plus per annum . The local markets have all but abandoned insuring small commercial units with tobacconists, and brokers are having to go to alternative markets like London to place the risk. It’s now becoming easier to insure a tattoo parlour today than a tobacconist.”
For brokers to manage this proactively, there are a number of elements to
42 / INSURANCE ADVISER FEBRUARY/MARCH 2026
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