A poll of Ai Group member companies has found a growing incidence of insurance stress related to huge price spikes, reduced coverage or an inability to secure any coverage on certain risks has afflicted more than 50 per cent of businesses.
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, which found that a surge in the number and size of class actions and the inclusion of climate change risks in policies were primary factors.
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 three-fold 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.
Among the key findings:
The most popular type of insurance sought among respondents was public liability (89.2 per cent), followed closely by Workcover (87.3 per cent) and property insurance (81.4 per cent). At the lower end was credit insurance (21.6 per cent), ‘other’ (54.9 per cent) and product liability (66.7 per cent).
More than half (53.3 per cent) of respondent businesses reported unusual trouble seeking insurance while 42.1 per cent reported no problems. Just 4.7 per cent reported that they did not seek insurance in the past 12 months.
The most commonly reported problem was high growth in premiums (reported by 55.6 per cent of those businesses reporting any problems seeking insurance). Coverage being too limited was reported by 14.8 per cent and inability to obtain desired insurance at all by 13.6 per cent.
Some businesses reported multiple problems.
The most common ‘other’ problem (16 per cent) 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 also were encountering higher deductibles.