Insurance - future trends for premiums
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Summary
We sometimes receive many funny looks and raised eyebrows at the AGM whilst going through the budget and discussing anticipated increases to strata costs. With insurance usually being one of the most significant expenses that make up the strata fees, increases of 20% of the premium can significantly impact the overall costs.
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So, why are premiums increasing?
There is a variety of reasons why insurance premiums are increasing for strata schemes in Australia, some of which we have listed below:
- Reinsurance: the cost of reinsurance has increased, therefore impacting the insurer's cost of doing business on each policy.
- Claims: the average claim costs across Australia have increased
- Rating: the underwriting process is more advanced and specific information relating to the property is more detailed, allowing the insurer to rate each strata more appropriately at an individual building level.
- If a policy has had claims in the past three years, an additional increase may be applied due to the claims history.
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More about insurance claims . . .
What about insurance claims? Some points to note that may affect the insurance premium:
- From an underwriting perspective, if the loss ratio is unaffected, then any premium rating will be as per normal, i.e. general increase
- If a claim is declined by an insurer, they may look more closely at the building in regards to defects and general maintenance which could lead to the insurer asking owners for a plan of action, copy of the 10-year maintenance plan. If there is no strategic planning for maintenance, they could vary (increase) the excess
- Where a policy has been subject to claims in the past 3 years, an additional excess may be applied due to the claims history. This will depend on the claims and any costs involved
- A premium increase may apply when a claim has been assessed by an assessor, appointed by the insurer, and subsequently declined. This is because there is a cost to the insurer in appointing an assessor