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Key takeaways/milestones from the quarter to date (FY22-Q4)

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As international travel resumes, corporate travel premiums are increasing by up to 300% as insurers seek to regain profitability. Insurers justify that general claims costs have increased, and leisure travel trips will be charged at a higher rate accordingly. In parallel, many insurers are now also offering broader coverage for medical expenses and travel cancellations related to contracting Covid-19.

• Property rates remain reasonably stable at present, with rates ranging from rollover through to 7.5% increases on low-risk properties.
• Insurer appetite remains low for less attractive risks such as high fire load and catastrophe-exposed areas where premiums have increased by up to 25%.
• Inflation is also fuelling reinsurance costs, with insurable flood losses in Australia having hit 4.8 Billion - the third costliest natural disaster in Australian history.
• The cost of managing insurance claims is also increasing due to the rising price of materials through supply shortages and shipping delays. These factors may cause property rates to increase, as insurers seek to claw back profits.
• Liability markets have seen premium increases ranging from 5-10% for low-risk placements, with up to 20% increases where there is a high claims frequency exposure such as retail shopping centres.
• Deductibles are growing for worker-to-worker claims and molestation cover is increasingly difficult to source.

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Key milestones/considerations for clients for the new quarter (FY23-Q1)

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The ability to present a well-managed and articulated risk profile with adequate controls is critical to obtaining favourable terms at renewal. As certain insurance markets harden, businesses should consider alternative risk transfer models like aggregate structures and electing higher deductibles to help balance increases in premiums. In working with a leading broker such as Honan, organisations can access in-depth risk profiling and program modelling - the keys to understanding their appetite for risk, and potential exposures to their bottom line.

Any industry trends you can see arising/developing over FY23? 

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Legislation to combat claims farming in QLD

To stop the insidious practice of claims farming, Queensland has become the first Australian state to ban the active solicitation of liability claims. It is hoped this will control the increase in claims brought under the Personal Injury Proceedings Act (“PIPA”) against Queensland businesses, with the potential to positively impact liability market premiums in the year ahead. You can find out more about the reforms and insurance implications in our recent update.

Unfavourable result for reinsurance in Northern Australia

Unfortunately, expected premium savings from the Government’s Northern Australia Reinsurance Pool (released on 30 June) are not as high as expected, making it an unappealing prospect for insurers to join. This suggests the scheme is unlikely to offer relief to the affordability and availability of cyclone insurance in Northern Australia. 

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