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Approaching Your Insurance Renewals in a Hard Market of 2020/21 - Needs a Dynamic Approach/Strategy.


There’s no escaping the fact that businesses are doing it tough. with a combination of losses related to the bushfires, storms and now the COVID-19 pandemic. Businesses are, quite rightly, looking very closely at their current/future finances and working through ways in how they can protect their bottom line from Australia’s declining economy.


Insurance providers are in the exact same position too. The latest Australian Prudential Regulation Authority (APRA) quarterly report in June indicated that insurance profits are declining and in consequence, premiums are increasing. However, when you add in the fact that many insurance providers are reducing their exposure in some markets in response to these challenges, you have what many people are calling a Hard Market.

How does a Hard Market in the insurance industry affect SMEs? The insurance industry goes through cycles called hard markets and soft markets. A soft market is characterised by lower premiums, broader coverage, relaxed underwriting, increased capacity and greater competition for your business. A hard market is the opposite, where it produces higher premiums, reduced capacity, narrower coverage, tighter underwriting and less competition. The combination of natural disasters, pandemic and economic downturn have resulted in a hard market culminating in higher premiums that are likely to remain in play for the foreseeable future.

How can businesses achieve the best rates for their policies in a hard market?

Business's best strategy is to sit down with their insurance adviser and discuss risk exposures. This is because once your adviser understands all your risks and they will be able to seek out the best strategy, tailored to your business needs. Apart from talking to your adviser, however, there are other steps businesses can take that will also help to achieve strong rates in a hard market.

  • Identify how much risk you are prepared to hold: Are you risk adverse or risk tolerant? Your answer will help you decide how much indemnity your business needs to reduce your risks to a manageable level.

  • Maximise your transparency: This means that you give your adviser all the information they need to accurately assess your risks. You should already have a risk management plan that includes strategies for reducing your operational, supply chain, and health and safety risks. Just keep this up to date and share it with your adviser.

  • Focus on the big picture: This means that you shouldn’t focus solely on the costs of your insurance but take into account the problems you will face if you are underinsured. Whilst costs are important, your losses will be far greater if you don’t have the right type of insurance or indemnities.

It’s good to remember that even in a hard market there are good insurance providers who want to help you minimise your risks and achieve the best rate possible. To discuss your insurance policies, talk to Risk Guidance Insurance today.


General Advice Warning The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.

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