The costs of building products and the impact on premiums

Insurance premium rises are directly linked to the increased cost of repair/building/maintenance. We often provide that explanation to clients, however the below graphic below paints a picture of just how much some costs have risen (this is from an article on domain.com.au dated 19^th July 2022).  

The increased cost in premiums (and this “hard market”) regularly referred to, is also the result of several other major factors, with possibly the most dominant being reinsurance. Reinsurance is basically when insurance companies take out insurance for themselves – they effectively transfer some of their risk to other parties. The major Reinsurers are all outside of Australia and are therefore impacted by the global economy and major catastrophic events around the world. Australia represents a very small portion of the insurance market globally, and therefore reinsurers aren’t exactly falling over themselves to offer reinsurance down under. The reinsurers’ premiums are high, which makes the insurer’s premium offering high, which means the GST and stamp duty figures are high. It all compounds to higher premiums for the end customer.

As a side note, the hard market we refer to, is likely to continue for another 2 years.