Insurance Premiums – Hard and Soft Markets
Wednesday March 14th, 2018
There’s good news and bad news for strata insurance premiums, particularly for people in southeast Queensland.
The bad news first: strata insurance premiums are rising, sometimes by more than 20 per cent as the insurance market hardens. The market in recent years has been relatively stable, with a large number of schemes even experiencing premium decreases in recent years. For several reasons, this has changed.
The good news: Insurance brokers are important in these times. They can continue to source the most competitive policy coverage and can act for you to get what you deserve in a claim.
Why are we experiencing a hard insurance market?
Most strata insurers service areas across Australia, not just southeast Queensland. Insurers have had to pay their highest levels of claims in several years because of natural disasters, cyclones, floods and major storms. Couple this with a reduced rate of economic activity in some areas of the country and that means that a larger number of insurers have decided to reduce their exposure to claims payments and increase their income to build capital.
Put more simply: increase premiums and pay less claims.
We have seen insurers becoming more detailed in how they assess the risks associated with a particular building. The use of more accurate flood mapping software along with increased scrutiny of building materials means insurers can exclude particular suburbs or streets if properties do not meet their underwriting criteria.
What to expect in a soft market
- Lower insurance premiums
- More appetite for insurers to provide discounts
- Reduced underwriting criteria
- Insurers willing to accept a wider range of locations and types of buildings and not be so tough on construction materials or the type of occupation
- Insurers willing to write more policies with higher building sums Insured
- Increased competition among Insurers meaning sourcing alternative quotations is simpler.
What to expect in a hard market
- Higher premiums
- Insurers not willing to provide additional discounts
- More underwriting conditions on some certain types of buildings
- Less of an acceptance on buildings in certain locations, with particular construction materials, type of occupation, etc
- Insurers not willing to insurer a building that is a above a certain Sum Insured
- Decreased competition meaning sourcing alternative quotation is difficult.
Why a broker is important during a hard market.
With insurers scrutinizing their costs more in a hard market, it can lead to claims being more difficult than normal. It can also lead to less of an appetite to negotiate with clients. And that means that direct market insurance products have been the most affected. Having a broker working for you instead of the insurer is crucial. Your broker is always positioned to fight for you. You deserve ever dollar that’s due. Your broker can also continue to source the most competitive policy coverage.
Tips for the best insurance outcomes
- Be ready to budget for increases in your insurance budget. Do not continue to expect stable premiums or decreases in premiums.
- Engage the services of a reliable Insurance broker. Your broker should be accessible and be willing to meet or speak with you to go through any concerns or questions you may have about your policy.
- Be wary of insurance brokers who try and get your business by reducing the fees you pay. The saying: “You pay peanuts, you get monkeys” is very true and reliable service is priceless and could mean the different in you receiving all that you are due in a claim or being able to effectively negotiate terms with an insurer.
- Consistently review your building sum Insured and the cover of your policy.
This article was contributed by Syna House – Account Executive, Marsh Advantage Insurance.