The main factors driving the rising cost of insurance
It only takes a quick look back at the news headlines from 2022 thus far to get an idea of the large-scale events we’ve lived through as a nation this year. The pandemic has understandably upheaved life as we know it and has been the root cause of many price hikes in the insurance space.
More pressingly, though, the catastrophic flooding experienced in QLD and NSW between February and March 2022 has proven to be one of Australia’s costliest disasters. Second only to the Eastern Sydney hailstorm of 1999, the recent flooding events came at the cost of at least $5.134 billion.
Considering the additional bushfire, storms and other extreme weather events that have wreaked havoc on our country since February last year, it’s little wonder that Australia’s insurance industry has experienced an extraordinary rise in claim costs. Resultantly, there will be continued pressure for higher premium rates from insurers, especially for risks exposed to natural catastrophes.
At what point do insurers increase premiums?
Premium increases are determined and handed down at the insurer’s discretion and therefore aren’t always predictable.
If you’ve experienced a change to your premium, there are several reasons this may have occurred:
- Your insurer may have reassessed your individual risk following a claim or a natural disaster. Government or expert information also provides the catalyst for reassessments to take place.
- There have been a considerable number of claims experienced within that sector of the insurance industry.
- The insurance industry experienced large-scale claims due to natural disasters
- The price and availability of re-insurance have been affected by global and domestic events.
- Rising inflation has triggered the need to adjust the current premium rate.
Why does inflation cause a premium rate hike on business insurance?
Premium rate increases from insurers aren’t always self-serving. Consider inflation’s impact on what you’re insuring in the first place: often, inflation will increase either the value, quantity (or both) of what you’re insuring. Understandably, a rise in the value or volume of insured assets or events means a flow-on impact on the insurer’s business cost.
The rising cost of living doesn’t discriminate — its impacts are felt in every business, including the country’s largest insurers.
Maintaining strong business protection in the face of inflation
Taking a proactive approach toward your business insurance is your best defence when balancing your business’s essential protection needs with your bottom line. Consider the cost of repairs verse the actual price of the cover, and gauge its adequacy in case of a claim.
Work with your business insurance broker
More than simply sourcing your business cost-effective cover, a business insurance broking specialist can provide invaluable assistance in:
- Ascertaining the correct sums insured to ensure your business doesn’t end up under or over-insured.
- Identify appropriate deductible and indemnity periods that are relevant to your unique business needs.
- Provide relevant guidance on your risk management measures, including accessing a property risk report and assessing your current operating climate.
- Form an insurance framework to identify gaps in coverage and provide a structure to continually build upon to ensure coverage into the future.
Hail, floods, storms, bushfires and cyclones have always been a part of Australian life. However, as we adjust to the ‘new normal’ of living with COVID-19, insurers need to balance the cost of continuing to provide coverage for the ever-present and seemingly increasing threats of natural catastrophes.
Accessing commercial insurance brokers can be your key to unlocking efficacy in an inflationary environment. Get in touch with us if you’d like to review your insurance cover and premiums.
