A BROKER has warned Brisbane companies to prepare themselves for increased insurance costs this year, with the recession and recent natural disasters set to push up risk levels.
Blue Broking CEO Richard Smith, expects the cost of insurable risk to increase for the first time in five years, due to a number of factors such as capital constraints, reinsurance capacity concerns, claim costs and greater pressures for insurers to produce profits from underwriting returns.
“Claim costs are expected to increase — particularly in professional liability classes in the light of the large falls in asset values seen, and the likely increase in litigation that will follow,” says Smith.
He says there will be a significant danger that Brisbane companies may choose to reduce insurance as premiums increase.
“This may suit a small number of select businesses but underinsurance is a significant issue in Australia for both commercial and domestic risks — as highlighted by the incidence of non-insurance in the recent Victorian fire-affected areas.
“Rather than reduce levels of insurance, the emphasis needs to be on achieving the best value with tightening expense budgets.”
He also points out that in times of recession, theft and employee fraud cases tend to increase so companies need to have appropriate insurance in place to cover this risk. Clients are also placing a greater emphasis on counter-party risk, in the event that an insurer might not be able to pay a claim in the future. Smith encourages businesses to proactively involve themselves in the insurance and risk process.
Get our daily business news
Sign up to our free email news updates.