Premiums for high-risk property and liability coverage continue to climb, driven by recent catastrophic weather events such as the flooding across South-East QLD and Northern NSW.
Supply chain issues and general inflationary pressures are also fuelling the costs associated with rebuilding properties and settling third-party claims, which are currently being absorbed by policyholders.
We have also seen a reduction in the limits and coverage available for Australian businesses. Unfortunately, Lloyds of London expects the pressures on pricing and capacity to continue as insurers seek to maintain acceptable loss ratios.
SMALL TO MEDIUM ENTERPRISES (SME)
Moderate-risk SME commercial insurances are becoming harder to place. This is reflected in rising premiums for business owners who are already feeling the strain of staff shortages and supply chain disruptions. Increasingly, SMEs are the victims of cybercrime because they often lack dedicated IT and cyber security resources and the conflicting pressures of running a small business mean it is not always front of mind until it is too late.
An independent review of the regulations governing medical practitioners who perform cosmetic surgeries was recently published by the Australian Health Practitioner Regulation Agency (Ahpra). Importantly, the findings will allow greater regulatory control and transparency. Having a clear and detailed set of guidelines will also enable underwriters to assess risk more effectively (e.g., knowing how these facilities manage complaints and patient safety), which will make it easier to obtain insurance.
eHealth Insurance products that combine Professional Indemnity, Technology Errors and Omissions, Intellectual Property, and Cyber Liability are proving popular for start-ups in this industry segment. Pricing remains higher than traditional Professional Indemnity and General Liability policies, however, offering multiple coverage sections under one packaged policy reduces the likelihood of gaps in coverage. Insurers require these businesses to have sound risk management and cyber security procedures in place before offering formal quote terms.
LIFE SCIENCE LIABILITY
We have seen a premium increase of between 5-10% across Life Science Product Liability accounts, and those with prior losses and US risk exposures have been hit the hardest.
The flat insurance market conditions continued for non-evasive trials, due to a healthy level of local insurer competition. First in-human implantable medical device trials are attaching at a higher price point (depending on the local requirements and the number of sites and participants involved). Many trials have required coverage extensions due to pandemic-related delays. In most cases, insurers have extended policies without additional premium.
Long-standing insurance programs may need to be revisited and challenged as premium increases for certain risks accelerate. Businesses with risks relating to flood-exposed areas, high-frequency liability claims, or sexual molestation risks may consider alternate forms of risk transfer, such as mutuals, captives, and aggregate deductibles to limit premium increases.
To help secure the right coverage and optimal pricing, be sure to engage with your broker well in advance of your policy’s renewal date.
With La Niña conditions set to dominate the Australian summer and water catchments already full after a wet winter, there is an increased likelihood of flooding events across Australia’s eastern seaboard this summer.
We have already observed a significant retraction in property insurance offered to businesses with assets in flood-impacted areas, and if coverage is provided, higher deductibles and decreased limits will be applied.
In addition, existing flood mapping information may be inaccurate, as recent events saw areas deemed “low risk” hit by unexpected flooding. As more insurers apply “pluvial” flood definitions to their policies (flooding caused by a build-up of surface runoff in low-lying areas, rather than overflow from a watercourse), businesses will need to work with their insurance brokers to understand whether their assets are now located in flood zones, or in areas with an increased risk of surface water runoff due to the surrounding topography. You can read more about the changes in some insurer flood definitions in our August update. In preparation for the upcoming wet weather events, now is an appropriate time to take inventory and pictures of your property and carry out all maintenance work.
STORM AND FLOODING
Damage from this year’s South-East QLD and Northern NSW storm and flooding events is estimated to have totalled $5.28B. To date, 233,000 claims have been submitted with approximately 15% of these relating to motor vehicle damage and the remainder due to property damage. Around 55% of those claims remain open, mainly due to labour and material shortages which are causing delays in restoring and repairing property.
BUSINESS INTERRUPTION TEST CASE
Insurers and consumers continue the journey to determine whether the business interruption cover under their property damage policies will extend to losses resulting from the closure of businesses during the COVID-19 mandated shutdowns. So far, the Federal court in what has been coined the ‘second BI test case’ has decided mostly in favour of insurers. The decisions were appealed to the full court of the Federal Court which also found mostly in favour of insurers. An application for special leave to appeal to the High Court will be heard in October 2022. If that application is granted, then the High Court will hear the appeal later. Following that, insurers and consumers will have clear guidelines on whether their property damage policy will extend to cover losses. We will continue to monitor these developments and keep our clients informed.
Protecting cash flow, guarding against late and/or non-payments from customers, and securing your company’s own creditworthiness is critical to business sustainability. This article looks at two key ways you can limit your liquidity risks: credit reports and trade credit insurance.
Honan Insurance Group Pty Ltd (Australian Financial Services Licence no. 246749, ABN67 005 372 396) is an insurance broker acting as agent for insureds and intending insureds. Honan is not an insurer. The information on this website has been prepared without taking into account your objectives, financial situation or needs. Any advice provided on this website is general advice only. Before making a decision to purchase an insurance policy, please read the relevant Product Disclosure Statement to make sure the policy is right for you. Insurance cover is subject to policy terms and conditions including policy limits and exclusions.
From time to time, Honan may act under a binder arrangement with an insurer. When this happens, Honan is authorised by the insurer to issue certain insurance policies on the insurer’s behalf. When Honan does this it acts as the agent for the insurer and not for any insured person. We will let you know when we are acting under a binder. You can view the Product Disclosure Statements for the insurance policies we issue under a binder arrangement here. A copy of the Target Market Determination for each policy is also available on this website.
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