Understanding Increasing Insurance Costs


You may be aware that we’re in the midst of a hard insurance market, with premiums across most types of insurance increasing and for some businesses, finding adequate insurance cover has become more difficult.

But for those outside the insurance industry, the way insurance pricing works can be something of a mystery.

If your business circumstances haven’t changed and you’ve not made a claim, it can be a shock to discover you could have to pay significantly more for insurance at renewal.

At its most basic, insurance operates on a pooled risk basis, so while the performance of your individual risk (ie. whether you’ve had a claim) does have an impact on your premiums, so does the overall claims experience of your sector and of the insurance industry as a whole, both locally and globally.

Factors effecting the current insurance cycle

The current hard market cycle is a result of several converging factors that have created something of a perfect storm of pressure on insurers.

  • Firstly, large insured losses resulting from recent natural catastrophe claims (such as the summer 2019-20 bushfires and floods locally, plus the US wildfires, hurricanes and European storms), along with increased litigation from class action activity, have hit the industry’s bottom line.
  • Secondly, increasing regulatory scrutiny about the amount of risk they carry and the amount of capital they need to cover their risks has resulted in insurers becoming increasingly risk averse.
  • And finally, insurers invest the premiums they receive to generate investment returns, however the persistent low interest rate environment has made generating investment returns more difficult in recent years.

The consequence is that insurers are being much more selective when it comes to which risks they choose to insure, with these supply pressures driving premium prices up.

How Gow Gates can help you get the best deal in a hard insurance market.

We understand the frustration our clients feel when their insurance premiums increase despite the nature of their risks remaining unchanged.

Having well-documented and detailed risk management procedures is vital to demonstrate the quality of your risk, but the good news is that there are others things we can do to help you secure the best possible insurance terms.

  1. We can review your risk program to take into account any changes in your business (particularly important due to COVID-19) and look at alternative ways to structure your risks to provide innovative insurance solutions.
  2. We can begin insurance renewal negotiations early (up to six months in advance of your renewal) to allow time for your business to be presented in the best possible light, and for us to negotiate with insurers on your behalf.
  3. We can look beyond your current insurer to a full suite of both local and international insurance providers to find the best fit, in terms of both coverage and price, for your business.

Gow-Gates Insurance Brokers has a highly experienced team focused on finding the very best insurance for our clients. Contact us today for risk management advice and a detailed discussion of your business insurance needs.

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