The construction industry is seeing some of the largest increases in premiums as inflation, supply pressures and natural catastrophes affect the broader insurance renewals market, Honan Head of Placement Travis Wendt says.
Mr Wendt says Honan had been seeing insurers becoming more aggressive in writing new business and gaining market share through top-line premium growth, but the environment has become more difficult.
“Ongoing flooding, supply chain pressures and lingering effects from COVID continue to stymie these growth aspirations,” he told insuranceNEWS.com.au.
“Honan was expecting premium rate increases to slow over the next three to six months. However, insurers continue to tread carefully as they remain focussed on bottom-line profitability and return to shareholders as opposed to providing cheaper insurance to policyholders.”
Rebuild costs have increased as much as 10% for large scale and complex commercial buildings that require significant materials, labour and freight, with insurers seeking to pass on costs to policyholders.
Some underwriters are less willing to take on the full costs of a potential claim, leading to multiple underwriters for a single policy, which adds layers of complexity and can further drive up premium costs.
The increased cost of construction is pushing up the value of buildings or assets being built, contributing to risk exposure sharing, although with insurers taking various stances on pricing.
Mr Wendt says rising premiums can lead to increased risk exposure by insureds through larger excesses, dropping cover and self-insuring.
“The challenge with this is that it can lead to a situation where the economic cost of a major event, such as flood, earthquake and fire, can far outweigh the insurance cost,” he says.
“This will continue to get worse over the next 12 months, leading to greater levels of social inflation and added cost of living in certain areas.”
Brokers have also reported some significant premium increases in a highly variable market in Far North Queensland, where household, SME and strata clients face a long wait before benefits flow from the government-backed reinsurance pool.
In one business pack example a takeaway premises was quoted a three-fold increase with the existing insurer, before a change to a different underwriter led to the premium doubling to $6000.
Structures with timber flooring or framing remain problematic, with an older-style office building seeing a 40% increase with the holding underwriter, while at the lower end of the property market there have been increases of less than 10%.
Strata was reported by one broker to be relatively stable, with some increases of around 15-20% from one underwriter.