News & Insights

Business insurance challenges – what the hard market means for you

Published 12 May 2022

Australian businesses have been doing it tough. After year on year disasters and the impacts of COVID19 business owners and boards are facing a further challenge in rising premiums and in some cases unavailability of insurance cover. Here are some of the influences to consider ahead of renewals.

While internal factors such as location and type of operation that affect access to insurance there are also external influences contributing to a ‘hard’ insurance market. 
These include 

  • catastrophic natural events and the increasing prevalence of extreme weather events 
  • large individual fire losses
  • lower investment returns for insurance companies 
  • higher costs from the treaty reinsurance market 
  • increased litigation from class action activity 
  • greater regulatory scrutiny of boards and directors 
  • COVID-19 implications 
  • environmental accountability pressures.

The combination of these conditions is forcing insurers to restructure their risk portfolios around long-term sustainability, with a focus on profits. As a result premiums have increased as tolerance for risk has tightened. Overall there’s significantly less capacity than there has been previously and because of this, placement is more difficult. 


Impact of current conditions on property insurance cover 

Business owners should expect premium increases to continue across the board and be aware that the percentage of the increase is determined by a number of factors, including location, use and construction type of their business property. 

Recent large losses mean that insurers are applying increased scrutiny to more challenging property risk types, including properties located in high natural catastrophe zones, buildings with aluminium composite panel (ACP) cladding and timber constructions.

In some cases, engineering reports are required by underwriters, and whereas in previous years a recommendation of risk management may have been made, insurers are now insisting those changes are put in place before they will consider insuring the property.

Businesses seeking property insurance should be prepared to adjust their policy limits and sub-limits to offset market conditions, and for risk capacity to be split across several insurers and insurer rate bases. At present some of our property placements may have 40 different insurers, with different attachment points and different levels.

Those with a claims history may benefit in taking on a greater level of risk with higher retentions/deductibles.

What businesses can do to meet insurance challenges

With insurers and underwriters exercising caution in the risks they take on the requirement for detailed risk management information is now a given. Here are our 4 key recommendations for preparing for your business insurance renewal.

Build a relationship with your insurance broker
Your relationship with your insurance broker and their relationship with providers in the insurance market are of critical importance. It’s imperative that your broker understands your organisation and knows its risk exposures associated with your business. This enables them to design a fit for purpose insurance and risk program with the correct coverage in place.

Start preparations early
The more time your broker and you and your business team have to work on the renewal of your insurance program, the more likely you will gain a result in this challenging insurance market. Building in a longer lead time enables your broker to negotiate with potential insurers, presenting your business in the best possible light.

Provide detailed business information 
In the current market conditions insurers will require more underwriting information. Collect and collate accurate, up-to-date building valuations and risk surveys. Be prepared to document and detail your risk management protocols. Insurers will also want to see your business’s risk control processes, supply chain management and your risk management program. 

Be open to doing things differently
Your insurance broker may be able to offer creative solutions for high risk businesses if you’re willing to take more risk on your balance sheet. Be open to working with your broker around changes to pricing, deductibles and coverage.

How Gallagher may be able to help with your insurance needs

Through utilisation of the markets in our global networks, particularly in Singapore and London, in addition to what’s available in Australia, we canvass availability comprehensively to secure cover where other brokers may not.

Talk to one of our insurance experts. 

Further reading


Insurance market conditions report: Navigating the hard market Q3 2021

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7 steps to securing optimal SME business insurance cover

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Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.
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