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Commercial premium rates rising, say brokersThe pace at which commercial insurance rates in Australia is rising is gradually accelerating, according to a survey released today by the National Insurance Brokers Association (NIBA). Insurance brokers handle up to 90% of Australia’s commercial insurance business, and NIBA’s twice-yearly market conditions survey provides a snapshot of the state of the market. The December renewals period experience shows the prolonged “soft” market is coming to an end. This latest survey finds 87% of respondents nominating commercial market hardness between 4 and 7, compared with 73% in June last year. Personal lines premiums have been moving upward for the past year, and this trend is continuing. 74% of brokers of the survey respondents put market hardness at between 5 and 7 out of 10, with another 13% putting it at 8. This is roughly similar to the findings of the June 2008 survey. NIBA Chief Executive Noel Pettersen says the survey results – the most authoritative available because NIBA brokers place most commercial insurance business in Australia – show the insurance cycle is now turning as expected. “Falling investment returns usually mark the beginning of a hardening market, and there are several other factors forcing insurers to abandon the highly competitive approaches that kept premiums low,” he said. “Now they are also dealing with the influence of a significant number of weather-related claims on their bottom lines, as well as the global economic crisis and the capital availability issues that may eventually arise. ” He said most brokers who responded to the survey were supportive of the rationale behind individual premium rises. “Most have remarked on the fact that the rises are sensible,” he said. “There have been very few complaints in this survey about irrational pricing being imposed, although some of the rises for harder to place risks are nevertheless significant. “A few insurers have tightened up their underwriting rules, so new business that may fall outside the mainstream measures of risk is being treated more cautiously than has been the case for several years. “But there is plenty of competition in the market from insurers and specialist underwriting agencies. “This isn’t the kind of situation we faced around 2001, when the insurance market hardened sharply and many liability risks couldn’t be covered. We are seeing the beginning of a correction after five or six years of soft conditions." Details of NIBA’s December 31 market conditions survey are as follows: Commercial lines – market hardness 87% of survey respondents nominated market hardness for commercial lines on a scale of 1 to 10 at between 4 and 7.
Personal lines – market hardness 74% put market hardness at between 5 and 7 out of 10, with another 13% putting it at 8.
Individual classes: In this renewals period 54% of brokers recorded rises in premiums, 37% suggested there was no change and 9% said they experienced decreases. Some 4% said insurers were continuing to cut rates to achieve market share, but 67% said the rises they had recorded were “reasonable”. Specific classes of business were as follows: Public Liability
Business interruption
Directors’ and officers’ liability
Professional indemnity
Business pack
Property
Commercial motor
Product liability .
Personal lines
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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