Insurance News
Broker braces clients for rates lift
by David Elias
7 July 2008
ECONOMIC TRENDS have conditioned clients to expect increases in insurance rates and brokers at Perth based Australian Consolidated Insurance have been warning them to factor in hikes of 5% to 7% during the next renewal season.
Managing director of ACIL Wayne Miller said the increases so far have not been overly dramatic and customers are not overly concerned at this stage.
“We are not seeing significant across the board price increases so we are not seeing a client backlash or a push out into for tendering, which you might normally see if there were outrageous increases.
“They have been expecting some increases because of inflationary trends, particularly the rising cost of fuel, contraction in the banking sector and increased interest rates.
“We have been talking to them, preparing them for increases as a precaution purely because of market dynamics. We’ve had 3 years of softening and now come increases.”
However, Mr Miller said the DOFI legislation and the capacity of Lloyd’s had the potential to minimise the increases.
“There will be a lot of inputs, a lot of risk coming out of direct offshore foreign insurers and underwriting agencies into Lloyd’s capacity. There won’t be such dramatic increase as would have been perceived.”
The rates for the top 100 companies had not moved up to any great degree but he said industrial risk has been soft for a long time and the trend was towards a risk retained premium and less discount to market adjustment.
“It has not been that risk driven in terms of differential between rates; if you are talking property, large office risk at 5¢ (a ratio of 0.05%) versus a manufacturing risk of 10¢ to 11¢. Manufacturing risk is now getting towards 15¢.”
Mr Miller said he expected to see some firming or adjustment depending on risk rating.
Liability premiums, however, had flattened out due to tort reform legislation. Insurers and actuaries were getting a better handle on the Australian courts and their reaction to the legislation.