The Australian insurance market is starting to enter the ‘hardening’ phase. This means many business owners can expect more expensive premiums, higher excesses and more narrow coverage. While there’s not much you can do to stop the hardening market, there are certain steps you can take to ensure the market hardening has less of an impact on your business’ bottom line.
What Is a Hard Insurance Market?
The insurance market is driven by the availability of insurance. If the market has significant capital coming in, it’s easier for businesses to get cover. This is known as a ‘Soft Market’. In a soft market, the consumer has more power as insurers will chase business.
A hard market is the opposite. With decreased availability of capital, insurers have to be more stringent. This means higher premiums, lower policy limits, bigger excesses, wider exclusions, narrower policy coverage and less competition between insurers.
Certain parts of the Australian insurance market are already showing signs of hardening. High-risk property, for example, property with building issues is becoming harder to place. Businesses with a history of losses are also finding it harder to get coverage they want.
How to Ensure Your Business is Prepared
There are certain things you can do to prepare your business before the market hardens:
- Secure higher policy limits or broader cover in advance, if you think you may need it later. For example, if you currently have cover for $5 million and you know you will need to increase it to $10 million, it may be easier and cheaper to get it now.
- Factor in the increased costs. With the cyclical nature of the insurance market, you can save for the inevitable, while you enjoy reduced premiums.
- Work with your insurance advisor. No matter what stage of the cycle the market is at, your insurance advisor will understand both the market and your business. They also have long-term relationships with insurers, which helps them secure the best cover for your business and its circumstances in any market condition. as well as being able to advise on likely future changes to insurance costs.
If you’re concerned about the costs of your insurance premiums going forward, speak to your insurance advisor. They will be invaluable in assisting your business in a hard market and will act as your advocate if a claim is rejected.
Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.
The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.