The rising cost of public liability, professional indemnity and debt insurance is increasingly becoming prohibitive to business, forcing many companies to close or take significant risks through under-insuring.
Industry analysts believe the trend has been sparked by insurance losses generated by the events of September 11, the collapse of HIH and a general increase in the number and value of insurance claims over the last five years.
While the level of litigation in Australia has not changed, according to the Insurance Council of Australia (ICA), public liability claims have jumped from 55,000 in 1998 to 88,000 in 2000, directly affecting the cost of premiums and prompting two state governments to hold an inquiry. A national forum on public liability was held on March 27 to discuss ways to tackle the increase in claims and improve public liability insurance availability.
What lies at the core of the problem, according to Warren Turner, technical services manager at the National Insurance Brokers Association, is a change in the public perception of insurance. "Insurance is a form of risk management, which offsets the risk from yourself to someone else," Turner explained. "But a lot of businesses are using it as a band-aid instead of an aspirin."
But like many a regulatory body over the last few months, Ross Cochrane, managing director of Express Data, begs to differ. "A lot of the current insurance problems are due to insurance organisations offering very aggressive premiums for a long time and then being hit by significant claims."
For the full report on insurance and how it affects the channel, read this week's issue of ARN, out now.