Insurance stress a growing concern for business

A poll of Ai Group member companies has found a growing incidence of insurance stress related to huge price spikes, reduced coverage or inability to secure insurance at all.

Following an increase in anecdotal reports, a poll of Ai Group members attracted more than 100 respondents of largely medium-sized companies across the country. Members were asked whether insurance was a significant issue and what problems they were encountering. This was followed by research into possible causes of the reported issues.

More than half of respondents reported unusual trouble seeking insurance in the past 12 months. High premium growth was the most frequently reported problem faced by Australian businesses.

Ai Group Chief Executive, Innes Willox, said: “A concerning number of businesses are reporting that there is a general lack of insurance options. Because of this, some businesses reported paying an extremely high price, or not obtaining insurance at all.

“One business reported a more than threefold premium increase with the excess going from $100,000 to $250,000 and the premium from $224,000 to $757,000.

“To date, COVID-19 has not played a major role in current insurance difficulties, but may still cause concern into the future given impacts still playing out in workplaces and the community.

“Ai Group’s analysis of the insurance situation found a number of local and global factors driving higher premiums. The explosion of largely foreign-funded class actions is one of the big drivers impacting on insurance concerns in addition to insurers factoring in climate change risks including more extreme weather events.

“The unusual trouble facing Australian businesses seeking insurance requires ongoing attention from industry and government. A competitive market environment where adequate and affordable insurance is within reach is in everyone’s interest – and an important foundation for Australia’s economic recovery.

“Without insurance, it becomes nearly impossible to operate, and as we recover from the COVID-19 pandemic we need to seek to reduce costs and participation barriers for business.

“It is clear insurance is a growing concern for industry, and therefore it should be a growing concern for government too,” Mr Willox said.

The full Ai Group report is available at this link.

Among the key findings:

  • The most popular type of insurance sought among respondents was public liability (89.2%), followed closely by Workcover (87.3%) and property insurance (81.4%). At the lower end was credit insurance (21.6%), ‘other’ (54.9%) and product liability (66.7%).
  • Over half (53.3%) of respondent businesses reported unusual trouble seeking insurance while 42.1% reported no problems. Just 4.7% reported that they did not seek insurance in the past twelve months.
  • The most commonly reported problem was high growth in premiums (reported by 55.6% of those businesses reporting any problems seeking insurance). Coverage being too limited was reported by 14.8% and inability to obtain desired insurance at all by 13.6%. Some businesses reported multiple problems.
  • The most common ‘other’ problem (16%) reported was a reduction in competition (fewer insurers offering relevant cover, but relevant cover was available). Thus, together with the responses on cover scope and insurance availability, a significant number of businesses face limited insurance choice.
  • The qualitative information that came from our free-text survey options also uncovered that in addition to higher premiums, respondents are also encountering higher deductibles.

/Public Release. View in full here.