Thousands of small and medium businesses unable to afford insurance are either being forced to close or gamble on going without coverage.
Businesses are buckling under the cost of public liability and indemnity insurance, with particular problems in the tourism, construction, engineering, professional services and hospitality industries.
A Business NSW survey of 745 firms found 63 per cent of tourism operators, 48 per cent of hospitality outlets and 33 per cent of transport companies were uninsured or underinsured for public liability.
Insurance taxes in NSW are higher than any other jurisdiction, with premiums in some areas soaring by 30 per cent a year.
Business NSW chief executive Daniel Hunter said the costs were putting some of Australia's favourite holiday spots at risk.
"Australia's love affair with the great outdoors is well known," Mr Hunter said.
"Yet the very businesses that make this happen – including camping grounds, outdoor recreation and hospitality – are being put in jeopardy.
"These are not businesses NSW should be prepared to lose."
A major factor in ballooning insurance costs in NSW is a levy on insurance that funds emergency services, which is exclusive to the state.
Premier Chris Minns told parliament on Tuesday the tax would be levied against properties instead.
Mr Minns said the excise had become a disincentive for households and businesses to take out insurance.
"There are thousands of mum and dad businesses that are one disaster away from shutting their doors permanently," he said during Question Time.
"Unfortunately, we can expect more disasters in the years ahead."
The Minns government went to the election promising no new taxes, but that's what the opposition has labelled the levy, a $1.5 billion property tax.
"You would assume having embarked on a similar reform in the not too distant past, the Liberal Party would be in support of this reform," the premier said.
The Business NSW boss welcomed the shift in revenue raising.
"But this is only one part of the puzzle," Mr Hunter said.
The organisation put forward several proposals to help struggling businesses, such as including them in conversations about changes to insurance.
It also called for better promotion of insurance options and removal of unnecessary red tape.
In 10 of the past 12 quarterly surveys, insurance has been the leading cost concern for businesses.
"These concerns trump taxes, energy and wages," Mr Hunter said.
A lack of competition is also fuelling the insurance problem in NSW, preventing people from shopping around.
"Uninsured businesses are vulnerable and their closure may result in bankruptcy, lay offs, legal problems and disrupted services, impacting both business owners and their customers," Mr Hunter said.
"Uninsured businesses don't want to be forced into a high-stakes gamble on their future, but they have no choice."
