The outlook for the insurance market in 2020 and beyond will see insurers continue to closely scrutinise their underwriting results across all classes of commercial and domestic insurance.
Put simply, insurers have their sights firmly set on underwriting profitability not written premium volume and investment income being treated as nice if able to get a decent return but relegated as a priority.
The remedial action being undertaken is not restricted to local insurers as Lloyd’s are also working on turning around their underwriting results.
As witnessed over the last 35 years or more, all hard insurance markets come to an end, however predicting the end of the current hard market has become more complex, given the weather related events that have occurred in every State and Territory across Australia during 2019.
Furthermore, the first month of 2020 is yet to finish and the weather related events so far are obviously not going to encourage an end to the hard market, as the number of claims and cost to insurers escalates.
Premiums and excesses will continue to increase in 2020 and 2021 and for commercial property risks considered by insurers to be non-hazardous and profitable due to nil or very little claims activity, there will be some flexibility to cap the premium increase and negotiate excess options.
Property risks in the high hazard category will in the short term continue to face double digit increases in the main, excesses increased over the past two years will not be reduced and expect nominated peril excesses such as Fire to experience a further increase.
More and more we are seeing insurers reduce their capacity or withdraw their capacity on property risks, regardless of whether the risk is considered hazardous/non-hazardous. In some cases a long standing/profitable relationship for the insurer will not guarantee renewal being offered by the insurer. Such decisions are being driven by the scrutiny we have already mentioned, as the perception of what business should be written has changed and also impacted by cost and restrictions imposed by reinsurance arrangements.
Property risks in North Queensland will be no less an issue when seeking insurers participation and capacity, due to the threat of cyclones and tropical storms.
In respect of commercial/residential strata risks, whilst acknowledging the well-publicised impact of aluminium composite panel construction on the cost and availability of insurance, the profitability of this class of insurance for some insurers was at best already marginal due to severe water / sewerage claims, especially at recently constructed high rise buildings.
Corporate Travel coverage and premium are being reviewed as the profitability of this class has been impacted due to the ever increasing cost of medical claims incurred whilst traveling overseas and the added exposure of the sheer variety of overseas destinations for both business/leisure travel.
The volatility (most notably in the last 12 months) in the insurance market for the placement of directors’ and officers’, management liability and professional indemnity coverage is due to our highly litigious nature which has been well documented.
Murmurings that our Federal Politicians need to review and restore balance to the legal system have so far amounted to very little action.
Over the past 27 years Scott Winton have worked with our clients as the insurance cycles have risen and fallen, kept up our close relationships with insurers (albeit testing at times) for the benefit of our clients and together we will come through the current insurance cycle.
Key to being able to place your coverage on your behalf at the best terms available (regardless of the insurance cycle) is ensuring your insurance risk is viewed by insurers as best or near best in class/industry/profession.
So in the current insurance market, if we are following you up to make sure you have implemented necessary risk improvements or seeking additional information, it is our job to advise/assist you to manage your risk.