Having personally seen a hardening insurance market in the early 2000’s the early signs are there that prices in a lot of product classes will start to turn upwards after several good years of discounting for clients. Shareholders of insurers don’t like to see income going backwards. As per the below link it is being reported QBE’s CEO has been pushed out on the back of shrinking profits a result of increased operating costs due to rising claims costs vs premium received. It is possible other insurance company CEO’s will see this as their own warning sign to make moves internally to rates. If that happens the importance of using a good insurance broker comes to the fore.
What’s a good deal in a hardening market?
Its a balancing act. Sticking loyal long term has its benefits whilst “insurer hoping” can provide short term savings but long term could find your business detrimentally affected if the insurance industry turns on you for say a bad claims experience or your occupation is suddenly seen as unprofitable. If you have stuck loyal with your insurer they often stick loyal with you.
But how much increase is reasonable?
If your broker is doing a good job they should be able to give you a good snap shot of how your current insurer is performing on your industry class and whether its time to make a move. They can also negotiate with your holding insurer by putting forward your case to keep prices down. The broker role for their clients will be as important as ever.
The good news:
July 1 2017 NSW will remove FSL Tax on all property premiums. 30% savings will be well welcomed and about time for the businesses who have been paying more than their fair share of taxes for those who were not insuring and conversely not paying FSL tax. Insurers are already on warning not to price gouge that 30% reduction. It will be interesting to watch how it plays out.
The likelihood of large increases that we saw in the mid 2000’s are unlikely as competition for growth of GWP remains strong. The risk of losing clients due to over zealous increases or moving too soon will keep many insurers dipping the toe in to see what they can get whilst also looking for opportunities to grow portfolios. The key phrases we are hearing is the attention to underwriting policies and portfolios that are under performing. In soft markets insurers do accept more policies and portfolios under performing but as the bottom starts to bite these areas will be addressed to return to profitability.