How to navigate the hard insurance market

January 31, 2023

If you’ve been keeping track of current insurance trends, you’ll notice that the market is experiencing a hardening phase, which means premiums are on the rise and insurers are tightening their terms and conditions. With the pandemic still looming over our economy, things are unlikely to change for the remainder of 2021 and continuing well into 2022. We hate to start on a grim note, but not to worry, we’ve prepared a guide on how to get through this hard insurance market.

First, let’s address the elephant in the room.

Why is the insurance market hardening?

The insurance market is cyclical, and it cycles between hard and soft stages. Each cycle typically lasts anywhere between two and ten years, and no two cycles are identical. The current cycle has been undergoing hardening changes over the last few years. This is caused by a number of factors, mainly:

– Falling investment rates / low interest rates
– Increases in frequency or severity of losses
– Reduced underwriting capacity
– Cost of reinsurance
– Regulatory intervention

Australia was already in the middle of a gradual incline towards a hard market. However, 2020 saw an unprecedented profitability blow to the insurance industry unlike anything we’ve ever seen. To give you an idea, the last calendar year saw only $35m in profit and compared to 2019’s reported $3.1bn, that is a 98.9% decrease. While the occurrence of coronavirus did not help cushion the impact, it is also the unpredictable weather demonstrations that have accelerated the hardening of the insurance market. Australia suffered cataclysmic losses from the effects of bushfires, cyclones, and hailstorms which resulted in insurers having to payout numerous claims in large amounts. With that, insurers may be reluctant or hesitant to insure those risks in the future.

Despite the bleak outlook, there are some steps SME owners can take to get themselves through the other side:

1. Partner with a trusted broker

We’re putting this at the top of the list because of the significant role a broker has especially during these turbulent times. Working with a broker who knows how to navigate the industry is a huge benefit to you and how your case is reviewed by insurers.

2. Plan ahead

Don’t wait until it’s time to renew your policy before you take action. Sit down with your broker to review your current plan and your ongoing requirements. Most organisations will allocate three months to thoroughly evaluate their business and complete an in-depth review of their insurance needs.

3. Prepare to provide more information

With underwriters scrutinising every tiny detail, you need to be prepared to provide more documentation, if requested, to better support your case. If you’re not sure what details to provide, speak to your broker who can help.

4. Prepare your risk control procedures

Documenting your risk control procedures is crucial and an imperative step in the renewal process. Insurers wants to see that you are taking the necessary steps to protect your premise and business assets. This may not have been something important to display in the past, but as we are sitting in a tough market, these documentations and their ability to influence insurance coverage should not be underestimated.

We cannot stress enough about the importance of having a trusted broker who can act on your behalf throughout this hard market period. Think of your broker as the person with the inside scoop on the what’s what within the insurance industry. A broker will assess your risks, advise you on the most appropriate covers, and structure your plan in the most cost-effective way. Our brokers at EWIB can negotiate preferential premiums and insurance coverage tailored to your needs.

At East West Insurance Brokers we have nearly four decades of experience and work with clients on all sides of the hospitality industry, all around Queensland. Our friendly and knowledgeable Insurance Advisors are here to help. Get in touch today.

1800 809 132  | |

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