Why did my Insurance Premiums rise?
Why did my Insurance Premiums rise?
When it comes time to review and renew insurance policies many business owners are asking – why did my premiums rise? It’s a fair question because most types of business insurance premiums have had premium increases, some very large and other not as big, over the past few years. In addition, many business owners would have found that some insurers are restricting cover in some areas of Australia or also no longer willing to offer some types of insurance cover any cost, due to claims.
So why are premiums still continuing to rise and what can you do to manage your risks and the cost of insurance premiums for your business?
Why are premiums rising?
Several years ago, premiums started to increase as insurers were no longer receiving investment income, as interest rates dropped to historically low levels. Insurers could no longer count on investment returns to offset losses due to claims. Premiums started to level off, however vast communities throughout Australia were impacted by natural disasters (bush fires, floods, cyclones and droughts) followed by COVID-19 (issues with supply chains, lockdowns and staffing) and recently, the Ukraine war and inflation. All these problems have combined and have collectively influenced rising costs, whether that’s in food, raw materials, white goods and a range of other categories.
Over the past few years, insurers have paid out billions in claims and assisted thousands of businesses and homeowners to rebuild. However, the cost of natural catastrophes has been rising, unprecedented bushfires and more communities than ever before impacted by catastrophic flooding, with some areas flooded several times.
On the plus side, there seems to be some movement toward funding public mitigation projects to improve building standards and make more informed planning decisions for disaster-prone areas. However, these are long-term plans and won’t immediately alleviate the rising premiums faced by SMEs.
Changes to insurance premiums explained – what’s a hard market?
Rapidly rising business insurance premiums, higher excesses, more exclusions, and less competition between insurers is what the insurance industry calls a Hard Market. This hard market was mainly caused by the cost of claims paid out for recent storms and floods being more than the total premium income they received. In addition, the cost of repairing cars, home and businesses has increased due to supply chain issues and inflations. For example, the cost of key building materials has increased 10% – 30% this year. This directly impacts the insurance premiums that businesses must pay. It is essential that you speak to your insurance adviser, who will work with you to manager your overall risks and suggest the best combination of excesses, cover and insurance premiums for you and your business.
What’s the solution to rising premiums?
Rising premiums mean that business owners need to either obtain professional risk and insurance advice or spend valuable time and resources considering alternatives, including reducing insurance cover. However, reducing your insurance cover exposes the business financially, especially during a disaster.
Which brings us to the assistance you can obtain from your professional risk and insurance adviser, who will help you achieve the best cover at the most competitive premium. That’s because insurance advisers have detailed knowledge of your industry that can help to manage and reduce your risks, providing financial security and certainty to you and your business, especially in these uncertain times. Insurance advisers also have access to specialised markets that generally don’t deal with customers directly. These alternative markets may provide lower premiums or less exclusions than other insurers. Insurance advisers can save you time and money and provide financial security.
For help reviewing your business policies, contact Lewis Insurance Services on 07 3217 9015 or send us an email by clicking here.
This article was published by our AFSL Licensee, Insurance Advisernet Australia P/L, www.insuranceadviser.net
This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the Product Disclosure Statement.