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Insurance premiums rising - cautiouslyNIBA brokers say competition is keeping rises in commercial lines lowInsurance premiums are rising, but it’s gradual and uneven, according to data supplied by members of the National Insurance Brokers Association (NIBA) following the June 30 renewals period. And their results show that most sharp premium rises have been experienced in personal lines insurance – home and contents and private motor. By contrast, the more competitive commercial insurance market has experienced significantly lower premium rises. Brokers say commercial insurance premiums are “hardening”, with 73% of brokers nominating market hardness on a scale of 1 to 10 at between 4 and 7. (1% said 1, 5% said 2, 10% 3, 21% 4, 21% 5, 22% 6, 9% 7, 11% 8, 2% 9, 0% 10). In June last year 22% of insurance brokers nominated commercial market hardness at 2 out of 10, 27% said 3 and 23% said 4. In personal lines, 72% of the survey respondents put market hardness at between 5 and 7 out of 10, with another 16% putting it at 8. (1% said 1, 3% 2, 3% 3, 3% 4, 24% 5, 32% 6, 16% 7, 16% 8, 0% 9, 1% 10). Personal lines results from June last year showed 38% rated market hardness at 5 and 15% at 6. Individual classesThis year 26% of brokers recorded rises in premiums, but 23% said they experienced decreases. Some 18% said insurers were continuing to cut rates to achieve market share, but 43% said the rises they had recorded were “reasonable”. Specific classes of business were as follows: Public liability: premium increases of 1-30% were recorded by 40% of the NIBA respondents; no change, 36%; premium decreases up to 9%, 14%; 10-19%, 8%; 20-30%, 2%. Business interruption: premium increases of 1-30% were recorded by 33% of respondents; no change, 51%; premium decreases up to 9%, 14%; 10-19%, 1%; 20-30%, 1%. Directors’ and officers’ liability: premium increases of 1-30% were recorded by 16% of respondents; no change, 44%; premium decreases up to 9%, 28%; 10-19%, 9%; 20-30%, 4%. Professional indemnity: premium increases of 1-30% were recorded by 19% of the respondents; no change, 41%; premium decreases up to 9%, 23%; 10-19%, 12; 20-30%, 5%. Personal linesIn personal lines classes, premium increases of 1-30% were recorded by 70% of the NIBA respondents, (50% said 1-9% and 20% 10-30%); no change, 27%; premium decreases up to 9%, 2%; 10-19%, 1%; 20-30%, nil. There were no rises above 30%. Comments by NIBA Chief Executive Noel Pettersen:The June renewal results provide a snapshot of the insurance market in Australia. NIBA brokers handle up to 90% of the commercial lines market and about 15% of the personal lines market. This year’s results, provided by NIBA brokers, reveal that overall, 50% of brokers reported “no change” in premiums negotiated with insurers, and 23% recorded decreases. However, when the figures are broken into specific classes of insurance, it becomes obvious that most personal lines insurers are raising premiums on householder and motor policies while commercial lines insurers are reacting to a highly competitive market by keeping commercial premium rises relatively low. For example, while 27% of brokers reported “no change” in personal lines premiums, 51% said there was no change in premiums for the key commercial class of business interruption insurance. Some leading insurers have said over the past six months that premiums will have to rise in the face of higher claims and falling investment earnings, but the intense level of competition in the commercial insurance market is keeping premiums lower than would otherwise be the case. The results also show the impact of increasingly sophisticated methods of data collection, which enables underwriters to more accurately rate separate classes of business and individual risks. For example, NIBA members responding to the survey say 24% of their commercial clients with “hard to place” risks experienced significant premium increases. Some 18% of NIBA members said insurers are cutting rates to achieve market share in specific commercial classes of business, and only 5% said they believed the decreases they experienced were “irrational”. While 9% of the brokers said the increases imposed on their clients’ premiums were “irrational”, 43% described any increases they experienced as “reasonable” and 7% said rises were only for “hard to place” risks. In summary, the June renewals reveal that there is still plenty of competitive activity in the Australian commercial insurance market, and that is to the benefit of the business community. In the past we have experienced very sharp rises in premiums as the economic cycle has turned. We expect rises will continue to be introduced over the next couple of years at least, but it’s obvious the insurers are being cautious in their approach. Where a client’s risk management and claims performance has been positive, most insurers are showing they’re keen to retain their business by keeping premium rises low. And where NIBA brokers have gone to the market and found similar commercial cover at a lower rate, they are reporting that the insurer holding the business has usually matched the lower premium to retain the client. However, there are exceptions. Some individual insurance companies have been reluctant to lower their original quotes to retain what brokers believe is good business. There’s no doubt that some companies have become more risk-averse, which has led to them losing customers. In such a competitive market they’re obviously going to end up with a smaller – albeit less risky – customer base. Note: Graphs of individual results can be supplied by emailing niba@mccmedia.com.au ENDS For further information contact Noel Pettersen on 02 9459 4300 NIBA is an independent industry association representing 500 firms and more than 2600 intermediaries, who handle almost 90% of the commercial insurance transacted in Australia. Brokers play a major role in insurance distribution, handling $10 billion in premiums annually and placing around half of Australia’s total insurance business. |
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