The Australian insurance market is expected to see rising premiums in 2024 due to multiple challenges it is facing.
One challenge is climate change. Australia is prone to significant losses caused by extreme weather events, including bushfires, floods, storms, and cyclones, leading to insurability and pricing challenges. Insurers are expected to face higher claims costs due to more frequent and intense natural disasters, leading to a direct impact on insurance pricing models and coverage availability. Insurance companies are responding to these challenges by investing in risk management strategies, such as advanced modelling and risk mitigation measures. Additionally, government regulations and incentives may play a significant role in the future direction of the Australian insurance market concerning climate change.
While climate change has been a topic of discussion for some time, Inflation is the word on everyone’s lips, and it’s not going away anytime soon. In the past few years, Australia has seen construction costs rise significantly due to various reasons however supply chain constraints being front and centre. Typical construction costs and the time taken to rebuild have extended well beyond the normal. Insurers are pricing these forecasted increases into their pricing models, and we are yet to see the full brunt of these changes flow through to policy premiums. Insurers are working with their customers however many policies are simply not set up correctly to allow for the changes to the economic environment we find ourselves in.
Here are a few helpful suggestions to assist property owners minimise costs and make sure your cover is set up to weather the storm.
Check the competition frequently
It is likely that your insurer will increase their costs over time. Therefore, it is recommended to have your insurance broker compare insurer rates since they are frequently changing. Sticking with the same insurance company does not necessarily lead to a discount.
Check your period of cover
Stress-test your loss of rent cover. Do you have the cash flow to survive following a fire at your property while rent is not being paid? What is the estimated duration for your property to be rebuilt, and for your tenant to resume paying rent?
Re-calculate your insured values and check your policy limits
Account for inflation and increased construction costs when calculating your insured values. Don’t rely on the norms as they no longer apply. A valuation (for insurance purposes) is ideal, or a builder’s quote will give you a good guide. Alternatively, you can rely on insurance industry calculators to assist with estimates. To avoid any possible future issues, it is recommended to take action now and choose a preferred method to re-evaluate your insurance policy. Keep in mind that your policy can be updated at any time.
Consider the unusual
Does your policy cover theft of buildings? A surge in theft of copper pipe from building air-conditioner systems has left many property owners out of pocket. Not all insurance products cover theft of building materials, but with a typical theft claim costing between $10,000 – $20,000 it pays to check.
It is advisable to have a discussion with your insurance broker to identify and comprehend your significant risks. They can help set up an insurance program to reduce your risk and also compare insurers to obtain the best price.
