Rising Costs in the ‘Small Business Insurance Tasmania’ Market
Welcome to our two-part article on this subject. In article one we will analyse the cause of these increases and Article two will consider what the small business owner can do to at least mitigate the increases and still maintain insurance coverage specific to their needs.
AT RSM Tasmania we understand that business insurance costs are on the rise. Average premiums for property classes, including Domestic and Commercial Motor and House Owners, have increased by 10-18% for the year to 30 June 2023.
Moreover, there is an anticipation of a further 10% increase in premium prices for 2023 as insurers aim to combat rising costs.
One of the main areas that has experienced a significant uptick in premiums is the Property and Casualty sector which provides coverage to individuals, businesses, and organizations for a wide range of risks and liabilities.
This sector includes various types of insurance policies including:
Homeowners Insurance
Individuals who own homes can purchase homeowners insurance to protect their property against damage or loss due to perils like fire, theft, vandalism, and certain natural disasters. It often includes liability coverage as well. Home insurance premiums have experienced a significant hike of up to 50% in high-risk areas in Australia during this period.
Auto Insurance
Auto insurance covers individuals or businesses that own or operate vehicles. It provides protection against accidents, theft, damage to the vehicle, and liability coverage for injuries or property damage caused to others in an accident.
Commercial Property Insurance
Businesses can obtain property insurance to protect their buildings, equipment, and inventory from various risks, including fire, vandalism, and natural disasters.
Commercial Liability Insurance
This type of insurance is designed for businesses and organizations to protect them from legal claims and financial losses resulting from lawsuits related to bodily injury, property damage, or other liabilities.
Workers’ Compensation Insurance
Employers are often required to provide workers’ compensation insurance to cover medical expenses and lost wages for employees who are injured or become ill on the job.
General Liability Insurance
This is a broad form of insurance that can cover individuals and businesses against a wide range of liabilities, including bodily injury, property damage, and legal defense costs.
Professional Liability Insurance
Also known as errors and omissions insurance, this coverage is for professionals such as doctors, lawyers, and consultants. It protects them from claims of negligence or mistakes in their professional services.
Specialty Insurance
The P&C sector also includes specialty insurance products tailored to specific industries or risks, such as aviation insurance, marine insurance, cyber insurance, and more.
Recent trends and data indicate that the surge in premiums is not a temporary blip. Instead, the industry anticipates a steady rise in these rates over the next year. Such projections naturally lead one to question the factors contributing to this shift.
The role of reinsurance is crucial in understanding these dynamics. Essentially, reinsurance is the safety net for insurance companies, a mechanism they use to distribute their risk and ensure that they don’t bear the full brunt of substantial claims. By passing a part of their portfolios to other companies, they buy themselves protection against significant losses. However, the cost of reinsurance has been skyrocketing.
Various global events are responsible for this uptrend. Economic downturns shake the financial stability of markets, making insurers more cautious. In parallel, the increasing frequency of natural disasters, attributed in part to climate change, means higher claims, leading reinsurers to increase their rates.
In the next article, which we will publish on Wednesday October 25th, RSM Tasmania will look at some positive things that will help business owners work within these changing conditions.
