Rising premium rates have been cited as the primary reason for a continuing national decline in the value of premiums written for professional indemnity (PI) and public and product liability (PL).
Figures from the National Claims and Policies Database indicate that in the 2012 underwriting year, APRA-regulated general insurers wrote $2,889 million of gross premium for PI and PL, down 6.1 per cent from 2011 and part of a years-long downward trend.
The overall number of PI risks written that year increased by 4.5 per cent to 508,000, while the number of PL risks written dropped 4.6 per cent to 2,313,000.
LMI Group Managing Director Professor Allan Manning says a tough economy means people are not increasing sums insured and in some cases are shedding cover.
“A lot of people don’t understand what coverage is about and are looking at it solely from a cost perspective,” Manning says.
“Others have had a small claim denied and so feel there is no benefit to having the cover, and have cancelled it completely.”
Manning says this is a disappointing trend and one that must be combated with increased consumer education of the risks of not being fully insured.
An additional pressure on the affordability of insurance are the Victorian and New South Wales fire levies.
“People would be thinking physical assets are more important to insure because of financing requirements,” Manning says. “So with things like professional indemnity and public and product liability they are either cutting or reducing their cover.”
The biggest drop in PI premiums written occurred in Victoria, which reported a decrease of 14.6 per cent, with the smallest decrease reported for New South Wales.