EDITORIAL: To insure to be sure
- 10 April, 2002 16:32
One of the biggest threats to the functionality of all private, public and non-profit enterprises today is the rising cost of insurance.
Every event, organisation and individual, from the Gulargambone Show through to the local under-8s football or netball team, has been alarmed - in some cases obliterated - by the sudden hike in insurance premiums.
By nature, journalists are cynics and I definitely fall into that category. My view about what is happening in the insurance industry is similar to my suspicions about banks. Insurance companies are not into taking "risks" at all, they are all about accumulating as much of the world's wealth as is corporately possible.
Neither the banking nor the insurance industry ever really loses money. Instead, they just take a hit, reassess and recover it back over a period of time. When the corporate thieves of the 1980s gave the banking industry a good touch-up - hello Mr Bond and Mr Skase (RIP) - the institutions themselves didn't cover the losses.
No, instead they just sought to retrieve losses a little bit at a time. This process is currently manifesting itself as fees. Most individuals and organisations now pay fees on just about every bank transaction undertaken.
Similarly, the insurance industry is now seeking to redeem some of the massive payouts it has been lumped with during the last five years. It just goes to show how the events of September 11 have had, and will continue to have, enormous global ramifications.
The way the global insurance industry is structured means that all large risks - say over $1 million - end up being underwritten by huge reinsurance organisations, mainly based in London and Switzerland. When they take a hit, such as on September 11, the reinsurance giants reassess the premiums they want to be receiving from smaller companies in the industry. These higher premiums filter down the food chain to the (relatively) small local companies in faraway places such as Australia.
In much the same way as the channel works, each tier in the insurance industry has to deliver value and glean a margin. As our page one News Analysis story this week uncovers, this is all conspiring to push the premiums up for all businesses - as much as 50 per cent according to some reports.
In a time when demand is down and margins are thinning, it's no wonder this additional overhead is applying pressure to the channel.
In the interests of long-term viability, insurance is something not too many channel companies can afford to overlook. Information technology is a high-value commodity. Even the uninsured loss of one notebook or one stackable switch could wipe the entire margin off a week's hard work.
Resellers about to receive renewal slips for insurance that was last paid 12 months earlier are in for a rude shock and will need to make budget provisions that were probably not expected.
Tell me how rising insurance premiums are affecting your business.
Meanwhile, April 30 is a date worth jotting into your diary. On that Tuesday, world-renowned IT industry research organisation IDC conducts its annual Directions conference in Sydney.
ARN is proud to be a media partner for this event, which focuses on what IDC is forecasting for the industry. This year's event will include the added bonus of a Channel Panel debate, in which ARN publisher Susan Searle will chair a discussion with five leading channel identities.
For more information about the IDC Directions conference and to make bookings, visit www.idc.com.au.