Brokers can breathe a little easier with an increase in SME insurance premiums showing up for the first time in the past ten financial quarters.
The Quarterly BizCover Small Business Insurance Index has shown that Australian SMEs may have seen the end of declining insurance premiums, with an increase of five points in the second quarter of the 2015-16 financial year.
BizCover Managing Director Michael Gottlieb says: “This is great news for brokers as prices seem to have found a floor.”
“In the retail sector, while there is significant capacity, the level of competition is not as great. This is because of the greater level of infrastructure required to write this style of insurance,” Gottlieb says.
“However, I expect pricing to bounce along the floor and do not expect any material uplift in rates in 2016. It would take a significant withdrawal of capacity for rates to harden materially.”
The major driver behind the increase is a hardening of rates in the non professional sector with Public Liability and Business Packs increasing four points.
The hardest hit occupation was the retail trade sector including restaurants, cafes and stores, which saw premium rates increase 10 percent.
The premium increase brings insurance rates back to the same level as the fourth quarter of the 2013/14 financial year.
Gottlieb says the changes have insurers caught in a corner, as the increase in rates is necessary due to the increasing claims-loss ratios.
“However, the need for the increase comes at a time of unprecedented capacity in the marketplace and therefore it is unlikely insurers will be able to continue to further push premium rates up,” he says.
Gottlieb predicted the rise wouldn’t deter customers, either.
“It is a great time to be a buyer of insurance and if businesses are willing to obtain multiple quotes it is likely they could still save on their insurance costs,” he says.
“There is still significant competition for business and therefore brokers should ensure they are broking risks to obtain the most appropriate outcome for their clients.
“If a broker can substantiate their recommendation and demonstrate the insured premium is competitive, in my experience the majority of clients will be satisfied.”