Blog Post

Six science-backed techniques to help you make hard decisions

by Contributor 30 May 2019 • Nov 17, 2021

by Aytekin Tank 


The typical adult makes 35,000 decisions each day. 

If you do the math (and account for seven hours of sleep), that’s about 2,000 decisions every hour — or one choice every two seconds. 


Most decisions are actually micro-choices, like clicking a link or taking a sip of coffee. But some choices feel momentous. 

An internal tug-of-war indicates that something big is at stake. You sense that the choice could significantly affect your happiness, freedom, pride, or personal fulfillment. 


If you’re running a business, there are even more decisions to make — and many are critical to the health of your company. 

The good news? Science is continually discovering new and better ways to make tough decisions. 


As Lea Heinrich writes in the New York Times, “over the past few decades, a growing multidisciplinary field of research — spanning areas as diverse as cognitive science, management theory and literary studies — have given us a set of tools that we can use to make better choices.” 

Unfortunately, none of these tools can actually make the decision for you. 


“They are prompts, hacks, nudges,” says Heinrich. 

“They’re intended to help you see the current situation from new perspectives, to imagine new possibilities, to weigh your options with more sophistication. 

There is no foolproof algorithm for life’s difficult choices. But the research shows that you can get better at making them.” 

In the 12 years since I started JotForm, my team and I have faced a lot of tricky choices, and I’ve tried many different decision-making techniques. 

Here are six methods that I rely on when I’m losing sleep over a challenging decision. 


1. Make a “value-based” pros & cons list
Imagine that you’re considering a move. Will you relocate to another city? Pull out a piece of paper and write a classic pros and cons list for the move. 

Now, here’s where science has added a helpful twist. 

Assign every list entry a number from 0 to 1, based on your personal values. For example, if being closer to your family is a “pro” that’s extremely high on your list, you might score it at 0.9 or 0.95. 

If you listed “near the mountains” as another pro, but you’re more of a culture hound than an alpine hiker, then it might only rate 0.2 or 0.3. 

Do the same for the “con” side. Leaving a job you love could score 0.8, for example, if your career is an essential part of your life. 

Add up each side, multiply by 100, and see whether the pro or con side wins out. You can also make a separate pro and con list for staying where you are. Compare the final values and see how you feel about the outcome. 

Often, confronting a “logical” number (which was actually weighted with emotions) can illuminate subconscious feelings. 

If you see the numbers but still feel pulled in the opposite direction, it’s worth doing some deeper exploration. 

You can also use this technique for smaller, less personal decisions, like which project or feature to tackle next. 


2. Explore future scenarios
Considering the best- and worst-case scenarios is a common way to make tough choices. 

What’s the very best future you can imagine? The worst? And how would you feel if that disastrous scenario became reality? 

To expand on this technique, psychologist Gary Klein has studied a twist he calls the “premortem.” In a classic Harvard Business Review story, Klein explains why a premortem is the hypothetical opposite of a postmortem. 

“A postmortem in a medical setting allows health professionals and the family to learn what caused a patient’s death. Everyone benefits except, of course, the patient. A premortem in a business setting comes at the beginning of a project rather than the end, so that the project can be improved rather than autopsied.” 

Imagine that your decision was terrible. The project you chose to tackle was a crash-and-burn disaster. Now, explore every possible reason for the failure. 

Once you address this worst-case scenario, you can take steps to prevent it — and make a better decision in the first place. 

In fact, research shows that premortems (which are also called prospective hindsight) can increase our ability to identify future outcome causes by 30%. 

On the flip side, try to visualize that epic, best-case future scenario and gauge how you feel. If you’re not happy or excited, it’s worth considering why. 

Amazon uses a variation of both these techniques. Company developers must draft a hypothetical press release and FAQ announcement before they even write any code. 

By working backwards, the team tackles the most difficult decisions upfront and clarifies the product’s value proposition. As reporter Jillian D’Onfro explains, “if the team can’t come up with a compelling press release, the product probably isn’t worth making.” 


3. Avoid binary choices
We often get stuck choosing between this or that. Should I go back to school or start a business? Should I move to San Francisco or stay in Houston? 

It’s easy to see the world in black-and-white, but there’s typically a grey option in the middle — or several shades of grey. 

Maybe you could spend summers in San Francisco (as long as you can embrace Karl the Fog) and winters in Houston. Or, you could live in Houston for another couple years and move to the Bay Area later. 

Sometimes the right choice is not one of two opposites. It’s a more creative, nuanced, or flexible solution. 


4. Consult with others
Sharing your dilemma with others can justify or reinforce a choice, but more importantly, it’s a valuable way to gather valuable information. 

If you can’t decide whether to move, for example, don’t just survey your friends and family (who will also have skin in your game); talk to someone who made the same move. Ask how they feel now about their decision. 

For professional or business decisions, try hiring a consultant. Find people who have deep, niche expertise and learn as much from them as you can. 

The extra information you gather will almost inevitably help you make better choices in the future. 


5. Give yourself enough time
I still remember the day I quit my job. As I climbed the two flights of stairs to my boss’s office, my heart was thumping in my chest. My legs were shaking and my mouth was parched. 

I knew it was the right choice, but my mind raced: “Am I making a mistake? Should I turn around? Maybe I should stay another year.” 

But, I made it to his office and had the conversation I was dreading. 

I had been thinking about this leap for at least two years, and my side products were easily paying the bills. Taking time to choose empowered me to make one of the best decisions of my life. 


6. Avoid hidden decisions
For nearly 6,000 years, North America’s First Nations hunted the plains buffalo by chasing them over cliffs and finishing the kill below. 

This method enabled tribes to gather and store large quantities of meat, hide and fat for the long winter ahead. 

I always wondered why so many bison would just run over the cliff. They were usually pursued by hunters on horseback, for one, but it’s also an example of herd behavior. All the animals are just following the group, letting the flow take them where it will. 

Buffalo jumps are a good metaphor for hidden decisions or non-decisions, which we’ve all experienced at times. When you procrastinate or delay an important choice, you’re still making a decision — and it’s rarely a good one. 

For example, maybe you need to part ways with an employee, but you put it off to avoid a potential confrontation. 

If the employee is negative, unpleasant, or ill-suited to their role, the choice to wait and delay can poison the whole team. Non-decision is a choice with real consequences. 


— 


Those 35,000 daily choices can be daunting, but quick action is the enemy of decision fatigue. Choose fast and whenever possible, tackle your choices head-on. 

Use as many methods as you need to pick the best solution. Just don’t follow the herd. Choose what’s best for you — and then stand firm in your decisions. 

One final note: if you’ve started a business or launched a product and you’re feeling overwhelmed by all the decisions, please know that it does get easier. Once your business is stable, many of the big, foundational choices are done and you will reach equilibrium. 

Then it’s time to focus on the constraints. Determine where you can make the most important, impactful decisions, and use them to grow or refine your business. 


Remember: decision-making gets easier with practice, and a new choice is always just seconds away. 


This was originally published here. 

 

Aytekin Tank is founder and CEO of JotForm, an online form creation software with 4 million users worldwide and more than 100 employees. A developer by trade but writer by heart, Aytekin shares stories about how he exponentially grew his company without receiving any outside funding.



Is your cyber gap exposed?

By Insurance Business Magazine • 12 Oct, 2022
Average knowledge among SMEs of the cyber threat environment, and solutions available, remains remarkably low for an area that's evolving much faster than other branches of insurance. CYBERATTACKS ON small businesses have increased dramatically over the last few years, but related insurance is still playing catch-up as clients and brokers underestimate the threat. This has resulted in a gap in how cyber insurance is perceived by SMEs, in terms of what it can do for businesses even before any attack takes place, and the degree of risk involved. At a recent Executive Insights panel on Insurance Business TV , industry experts set out their concerns and where they see the market heading in one of the fastest-evolving areas of insurance. On the one hand, the digital evolution of both the economy and society due to the pandemic has resulted in an increasing awareness of the dangers posed by cyber, and more organisations taking up related policies. On the other, many SMEs still underestimate the amount of damage that can occur and continue to consider the cyber threat as one that can be mitigated after an attack occurs. “I think there's a miscalculation from a lot of SMEs about what it actually takes to recover from an event,” said Richard Smith, head of cyber at Blue Zebra Insurance. “The cost to recover from an event can be significant; you know, the legal costs, the forensic costs, the ransomware negotiation costs.” Many SMEs also significantly underestimate the time it takes to recover from a cyberattack. It is often thought that the cyber threat is only limited to certain sectors such as retail or healthcare. “But every single business that uses a computer and has an employee has an exposure,” said Lindsey Nelson, cyber development leader at CFC Underwriting. The great SME cyber turkey shoot Many SMEs are blissfully unaware that the risk terrain has changed dramatically in the last three or four years. It's as if a Sunday stroller enjoying a botanical garden didn’t realise, they had stumbled into the Amazonian jungle. The latest data threat report from Thales Group showed that four in 10 Australian businesses fell victim to a cyberattack last year. “[Small businesses] still don't appreciate that level of risk that they face, and many are still surprised when they see the price … even though it's their top business risk,” said Nelson. SMEs sometimes don’t want to pay for a product that only brings benefit at some unforeseen point in the future. But cyber insurance today actually starts working for businesses from the first day they bind the policy by proactively using threat intelligence to look for signs of vulnerability or compromise, Nelson explained. Remote working is one factor behind the higher risk. “It has led to a greater chance of infiltration from the threat actors,” said Michael Ussher, commercial manager – Asia Pacific at DUAL Australia. Using home Wi-Fi networks or public Wi-Fi in places like cafes or hotels creates vulnerabilities. “The amount of surface area that can happen for this infiltration has been obviously significantly greater over the last few years,” he said. SMEs often feel that they aren’t a target due to their small size. But size is beside the point when criminals are engaging in a volumes-based attack strategy.

Airspace Rights and Crane Oversail - What you need to know

By Active Law • 28 Sep, 2022
Due to schemes often being in high density residential zones, it is common for the Committees to be approached by developers of neighbouring land seeking rights for cranes to pass over the common property to facilitate a development. Can a Committee just refuse? The Property Law 1974 empowers the Supreme Court to impose rights of use in respect of land including oversail rights if satisfied the owner of the land over which the rights would be imposed can be adequately compensated. The Act also empowers the Court to order costs be paid by the owner of the land over which the rights would be imposed in “special circumstances” which could be expected to include where a request for oversail rights was not considered or refused without good reason. Good reasons may include a refusal by the developer to pay fair compensation, or to pay the Body Corporate’s costs of negotiating the requested rights and costs of putting the request to Lot owners to vote on, as required by legislation. Does the Committee have power to grant the rights? No. Oversail rights are in nature of a licence over the common property and the Body Corporate and Community Management Act 1997 mandates that such rights must only be granted in the way authorised under the regulation module applying to the scheme. Usually that means a special resolution is required for the Body Corporate to grant oversail rights. Can the Developer be asked to pay costs as well as compensation? Yes. The Body Corporate can reasonably require payment of all costs incurred in granting the rights, including legal and extraordinary general meeting costs, in addition to compensation for the grant of the rights. In additional to compensation, we have also assisted bodies corporate to obtain benefits such as the cost of a building wash down and new fences. Are there risks? Though rare, accidents happen. In 2012 the motor of a crane on a construction site at the University of Technology Sydney caught fire resulting in the collapse of the boom into the construction site.  In 2016 the motor of another crane on a construction site in St Kilda Road, Melbourne caught fire similarly resulting in the collapse of the boom of the crane.

Fluctuation in Material Costs - How Price Adjustment Clauses are used in Fixed Price Contracts

By Active Law • 14 Sep, 2022
We don’t have to tell you that a perfect storm of events has caused uncertainty in the availability and cost of materials. To manage the risk, contractors are shortening acceptance periods for quoted prices, repricing at signing to capture material price increases (leading to frantic negotiations between clients and construction funders), including special conditions for the contract price to increase by an arbitrary amount or for the contract to end entirely, if certain events have not occurred by set dates. While it may be expected that contractors would elect in the circumstances for cost-plus arrangements, we are not seeing that. Likely reasons are the hesitancy of financiers to lend on such arrangements and statements from QBCC like the following (currently on its website) causing pushback from the homeowners— “Cost plus contracts and construction management contracts are contract models which involve added responsibility and risk for both home owners and contractors. We do not recommend using them.” Instead, we are seeing an increased use of price adjustment clauses in fixed price contracts, with contractors electing in domestic construction arrangements to treat more components as ‘prime cost’ or ‘provisional sum’ items seeking, protection against unavailability and unknown cost. Does that work though? The short answer is not to the extent many contractors think it does. The meaning of ‘prime cost item’ and ‘provisional sum’ are defined in the QBCC Act. The Act defines a ‘prime cost item’ , for a domestic building contract, an item, including, a fixture or fitting, for which a reasonable allowance is, or is to be, made in the contract, that— “has not been selected”, or “the price of which is not known, when the contract is entered into”. The Act defines a ‘provisional sum’ , for a domestic building contract, as an amount that is an estimate of the cost of providing— “particular contracted services”, and “for which the building contractor, after making all reasonable enquiries, cannot state a definite amount when the contract is entered into”. So, unless the item or service falls within ones of those definitions, it cannot properly be listed as a ‘prime cost’ or ‘provisional sum’ item. We are seeing instances of contractors listing basic materials like timber and concrete (and even forms like “roof frame”) as prime cost or provisional sum items and they are unlikely to get the protection of the respective prime cost item and/or provisional sum clauses. Protection against increases in the cost of materials can be provided though, by an appropriately drafted ‘rise and fall’ clause. When a rise in the price of materials poses an unacceptable risk to projected profits, it can be managed by a ‘rise and fall’ clause. Rise and fall clauses may be cost-based or formula-based and enable increases and decreases in actual cost at the time the cost is incurred to be passed on as an adjustment to the contract price. A ‘rise and fall’ clause must be carefully drafted though to limit scope for misunderstanding. Building disputes occur when there is misunderstanding, particularly in relation to matters affecting the contract price. A rise and fall clause must be certain in its operation and calculation to avoid dispute or worse, the clause being declared void for uncertainty. We can assist with advice on and drafting of rise and fall clauses and other contractual mechanisms for managing uncertainty in the availability and cost of materials. Disclaimer – Reliance on Content The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

The Importance of Disclosure - Landlords lose dispute over vacant property fire

31 Aug, 2022
The owners of an unoccupied home that sustained severe fire damage will not have their claim paid after a dispute ruling determined that their insurer was entitled to decline it. The landlords lodged a claim under their home building policy on November 10 last year. Auto & General declined the claim after its investigation found that the complainants failed to inform it that the property was vacant and cancelled their policy over the alleged non-disclosure. The claimants admitted that the property was unused but said it was due to renovations that had been prolonged due to covid-related restrictions and delays. They said they intended to rent and renovate the dwelling while waiting for a development application process for the property that was expected to take over a year. Auto & General said the homeowners knew at the time of the policy inception on January 22 last year that significant renovation works were required to make the property habitable. The complainants informed the insurer they would “try to rent [the property] quickly” and that the property would not be unoccupied for more than 60 consecutive days. Due to ongoing covid restrictions, the owners could not inspect the home until two weeks after the policy was instated. The landlords said it was only after the inspection that they realised the property required more extensive repairs than initially thought. They said they could not put a deadline on the renovation work because of covid restrictions. The Australian Financial Complaints Authority (AFCA) panel said the critical issue was whether the insurer could prove that the complainants knew the property would not be habitable beyond the 60 days mentioned in the policy questionnaire. “What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term 'known' ,” AFCA said. The panel said that based on the available evidence, the complainants showed that they intended to rent the property when the policy was issued. The ruling required the insurer to remove the policy cancellation and allegations of a breach of duty of disclosure from the complainants' insurance record. AFCA did determine that Auto & General was entitled to decline the claim for the fire damage to the property, saying the policy clearly stated that it would only provide cover for a home that was unoccupied for a maximum of 180 days . At the time of the claim, the complainants did not inform the insurer that the home was uninhabited and had been vacant for 292 days . AFCA rejected the homeowners’ assertion that they were unaware of the policy stipulation, saying it had been stated in documents provided to them. The panel considered whether it was fair for the insurer to rely on the provision in the light of Section 54 of the Insurance Contracts Act 1984 (Cth), which prevents insurers from refusing claims based on an act committed after the engagement of a contract unless the action was shown to contribute to the loss. The fire had been determined to be suspicious by the police, and neither party disagreed that unknown third parties accessed the home at times leading to the fire because it had been vacant. AFCA said it was fair to determine that the property was left more vulnerable to the claimed damage because it had been left unoccupied for more than 180 days. The ruling allowed Auto & General to decline the claim but required it to refund the complainant’s premiums from July 21 last year – 180 days after the policy inception date – because the cover had not been applicable. The insurer was also required to pay the claimants $2,000 for non-financial losses related to stresses and inconvenience caused by the claims process. The panel said aspects of the insurer’s investigation were unreasonable, including several interviews deemed unnecessary and invasive of the complainants' privacy. Click here for the full ruling.

$102 million remediation announced for insurance customers

By Daniel Wood • 19 Aug, 2022
The Australian Securities and Investments Commission ( ASIC ) has announced that is has secured $102 million in remediation for customers who were mis-sold funeral and life insurance policies. The policies were sold by Freedom Insurance between 2010 and 2018 and involved more than 83,000 customers. The regulator said thousands more customers could still be entitled to refunds. “Freedom Insurance used harmful sales practices to sell funeral, accidental death and life insurance policies to vulnerable customers,” said ASIC deputy chair Karen Chester. “They also used unfair retention practices to keep customers in the policies when they tried to cancel.” The ASIC media release said the regulator identified the harmful sales and retention practices of Freedom Insurance in its 2018 review of the sale of direct life insurance. The release added that this conduct was subsequently highlighted as a case study during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. In response to the Commission, in 2019, ASIC announced a ban on the unsolicited cold call telephone sales of direct life insurance and consumer credit insurance. In 2021 ASIC commenced civil penalty proceedings in the Federal Court against both the former managing director and former quality assurance manager of Freedom Insurance in relation to the sales incentive programs offered by Freedom Insurance “We believe there are thousands of customers that likely remain entitled to a refund but they haven’t come forward to claim it” said Chester. “We encourage Freedom Insurance customers from between 2010 to 2018 who believe they were mis-sold a policy, or who tried to cancel their policy without success, to contact their insurers and be assessed for remediation.” The release said Freedom Insurance no longer sells or administers insurance products and in 2020 its companies were placed into external administration in and have de-registered.

Half of Australians believe climate change is driving up insurance premiums

By Roxanne Libatique • 03 Aug, 2022
Almost half (49%) of Australians believe that their insurance premiums have been skyrocketing due to the impacts of climate change, according to Mozo's latest research. The report showed that 67% of landlords, 61% of renters, and 57% of drivers reported insurance premium increases on their policies in the past 12 months – with floods, storms, and bushfires driving claims across home and car insurance policies, at around $4.8 billion . The results corresponded with recent NRMA research, which revealed that 77% of Australians are concerned about the severity and frequency of natural disasters in the country. Focusing on home insurance, Mozo's research found that two-thirds (62%) of home insurance customers surveyed saw their premiums rise in the past 12 months. Of those surveyed, 17% said their premium had significantly increased. “Insurance is increasingly out of reach for many Australians, as premiums rise on the back of floods, fires, and wild weather, with the situation set to worsen as climate change takes its toll across the country,” said Mozo money expert Tom Godfrey. “As the premium hikes and severe weather events continue to erode the value of insurance for many Australians, many homeowners are increasingly financially vulnerable,” he continued. “With cheaper housing often built in disaster-prone areas such as on flood plains and in bushfire zones, it's people who need the most financial protection who can least afford it.” Almost a third (32%) of the participants had to claim on their home insurance in the past year, with 37% claiming for flood damage, 37% for storm damage, 21% for theft, and 19% for bushfire damage. Focusing on car insurance, Mozo noted the Insurance Council of Australia's (ICA) study that found car insurance premiums in 2022 had shot up by 21% year-on-year from 2021 as Australians return the roads post-COVID-19-related restrictions. Additionally, the frequency of claims had also bounced back from lockdown lows by 5.6% from 2021. The report further revealed that 22% of the respondents made a car insurance claim in the past year, of which over half (54%) claimed for a minor accident and 27% for a major accident. Other claims were related to hail damage (21%) , theft (18%) , bushfires (16%) , and flooding (13%) . When asked how they reduce the cost of their car insurance, 21% of the respondents said they plan to increase their excess to lower their premium in the next 12 months, 19% will reduce the kilometres they drive, 16% will decrease the sum they are insured for, and 7% will cancel their insurance policy.  “With Mozo's analysis finding the cost of cover often driven by where you live, how far you drive, your gender, age, and car colour, taking the time to compare car insurance policies can be a simple and effective way to drive home a more competitive deal,” Godfrey said. Regarding the impacts of climate change on insurance, Godfrey said: “It seems clear that the increased frequency of extreme weather events will put significant stress on the insurance providers, and their customers are likely to feel the effects in the form of significantly higher premiums or, in extreme cases, the inability to access insurance.” As Australia remains vulnerable to the impacts of climate change, the insurance industry has been warning governments and Australians that some areas in the country might be uninsurable in the future. Meanwhile, some insurers have started battling against climate change, with insurers implementing sustainable initiatives and major insurers committing to net-zero.

Beyond the floods

By Bernice Han • 15 Jul, 2022
The industry did well last year, after the 2019/20 Black Summer. But will the worst floods on record derail its momentum?

Take The Lead in Your Business with Finance, People, Strategy

26 Apr, 2022
Taking charge and making the right decisions at the right time is critical for businesses. We would like to share with you some information about one of our key partners, Karen Arnold the Director of Effective Workplace Solutions, who is presenting in an upcoming one-day business event. The business event is designed to share ideas to bring your business into alignment where you will learn the fundamental tools and insights you need to manage people, cashflow and develop strategies to take your business where you want it to go. Effective Workplace Solutions are specialist practitioners who provide practical advice and assistance in workplace relations, employment law and human resource management procedures and all employment law and workplace law related matters. Karen has a law degree, majoring in Industrial Relations and qualifications in Training and Assessment, and Business Administration. Karen’s experience includes HR and employee relations, business development, advisory support, performance management, policy development, guidance and leadership, general compliance, grievance resolution, and implementing productivity-inducing practices. Effective Workplace Solutions areas of expertise include: Representation in the Fair Work Commission for unfair dismissals General protections claims Negotiating enterprise agreements or the cancelation of agreements Management of workplace bullying and harassment claims Generalist advice in relation to employment contracts Award interpretation Managing workers compensation claims and return to work Policies and human resources. Event Details: Thursday 12th May 2022 9:30am for 10:00am start. Finish at 4:00pm for networking till 5:00pm. Open Bar & Nibbles. Twin Towns Service Club: Vision Room BOOK HERE >> https://bit.ly/TakeTheLead2022 Karen Arnold's Details: 02 6676 3445 0423 380 359 karen@ewsolutions.com.au ewsolutions.com.au

Disaster Recovery Grants

17 Mar, 2022
The QLD and NSW State Governments have announced grants of up to $50,000 for small businesses impacted by the recent rainfall and flooding in New South Wales and South East Queensland. Funding is available for: Equipment and materials to undertake clean-up Additional labour costs above and beyond normal expenditure Disposing of damaged goods and stock Repairs to buildings (other than housing) Reconditioning or repairing essential plant and equipment Purchase or hire/lease costs for equipment necessary to the immediate resumption of the business Payment for tradespeople to conduct safety inspections Essential repairs to premises and internal fittings not covered by insurance. The grants are available in two parts: a) An initial claim of up to $15,000 and b) A subsequent claim of up to $35,000. All claims will need to be accompanied by evidence of direct damage such as photographs, quotations, tax invoices or official receipts. For New South Wales Affected Businesses: For further details, including eligibility criteria, documentation required and how to apply online, please visit the State Government’s Service NSW website. For South East Queensland Affected Businesses: For further details, including eligibility criteria, documentation required and how to apply online, please visit the State Government's QRIDA website. If you find you're ineligible for the grant program, a number of loan assistance schemes have also been announced, including a $250,000 disaster assistance loan and $100,000 essential working capital loan. If you'd like assistance or advice regarding your eligibility or whether you should apply for the grant or loan schemes, be sure to contact us today.

COVID-19 BI test case: "Really disappointing outcome" for businesses

By by Daniel Wood 23 Feb 2022 • 23 Feb, 2022
This week, the Federal Court handed down its judgement in five appeals concerning business interruption insurance (BI) policies and the pandemic. This ruling in the Second COVID-19 insurance test case substantially upholds the ruling in October by Judge Jayne Jagot. “This is a really disappointing outcome for most Australian businesses, a lot of whom have been brought to their knees by the pandemic and continual interruptions to their businesses,” said Poppy Foxton (pictured), national head of corporate insurance and risk solutions for Honan Insurance Group. Foxton and legal experts said the judgement reinforces the position adopted by insurers that BI policies are not intended to provide pandemic cover. This latest decision, said legal experts, also makes it more likely that insurers will avoid paying out billions of dollars for pandemic related BI insurance claims. “Added to this is the protracted legal battle after businesses saw glimmers of hope in the first test case, only to be disappointed by the second test case,” said Foxton. Read more: Federal Court announces appeal ruling in second business interruption test case In the first test case the High Court of Australia denied insurers’ application for special leave to appeal an earlier judgement of the NSW Court of Appeal that found in favour of policyholders. That test case concluded in June 2021. Foxton said if this appeals judgement in the second test case had favoured policyholders, payouts would have been expected. “Had the decision gone the other way and the full Federal Court upheld the appeals and subject to no changes to that decision by the High Court the insurers would have paid out the claims,” she said. However, she said this would have created considerable uncertainty across the insurance industry and destabilized rates that have only just begun to settle in recent quarters. “Ultimately, Australian businesses would have felt the impacts of this action down the track through steep premium increases. Insurance policies aren’t designed to cover pandemics or terrorist attacks and we need to look for other solutions beyond insurance alone,” she said. “It’s a pretty disappointing outcome for policyholders,” Mark Darwin, partner at Herbert Smith Freehills’ insurance practice told the Australian Financial Review. The practice represents insurance policyholders although none of them were in this case. Nonetheless, the issue of BI policies and possible pandemic coverage is not over yet. The parties involved in these proceedings have 28 days to apply for special leave if they wish to appeal to the High Court. In a news release responding to the ruling, Insurance Australia Group ( IAG ) said it was reviewing the judgement to determine whether to seek leave to appeal any aspect of the ruling. “At this stage, there will be no adjustment to IAG’s $1,222 million net provision for potential business interruption claims,” said the release. However, IAG said it will refine this prediction of ultimate claims costs “as the legal position becomes more certain and claims experience emerges.” IAG said, subject to the outcomes of the appeal process, “current indications are that a release from the provision will occur and is likely to be recognised over time.” In its news release responding to the judgement, the Insurance Council of Australia (ICA) said the ruling “provides further clarity on key issues in respect of the wordings in business interruption policies such as disease definition, COVID-19 outbreak proximity, the impact of government mandates and other policy wording matters.” Read more: Judgement announced in COVID-19 BI test case “These matters are not clearcut and we acknowledge that this has been a long but necessary process that will ultimately provide important guidance on how business interruption policy wordings are to be interpreted and applied,” said the ICA’s CEO Andrew Hall. The Full Court did reach a different view to Justice Jagot on what it called “certain subsidiary issues.” One main difference was around whether the insured would need to account for certain payments or benefits received from third parties, such as JobKeeper payments. John Berrill, insurance lawyer with Berrill and Watson, told the AFR that these rulings on JobKeeper would boost potential payouts. Berrill, whose firm represents businesses in dispute with their insurers, also told the AFR that a significant number of claims would still be viable. “We hope that the matter can be brought to a close as soon as possible,” noted the ICA’s CEO. Related stories: Blue Zebra's bosses weigh in on COVID-19 BI test case Business interruption insurance and pandemics – policy coverage issues
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