Insurance premiums are under intense competitive pressure from the arrival of new foreign players entering the local industry. But the market may level out as soon as next year as the sub-prime crisis in the US claims some insurance companies.
Prices for commercial insurance products that include professional indemnity have dived since 2005. Now they are set to fall further. The latest National Claims and Policies Databases report shows public liability insurance premiums and professional indemnity insurance fell on average by about 9% in the 12 months to December 21, 2006.
Some underwriters are predicting another 5–10% fall. But Nicholas Scofield of Allianz Australia says he expects a leveling off in 2008 after three years of substantial reductions in the market.
The sub-prime crisis in the US and the collapse of some players including Westpoint, Bridgecorp and ACR will have an impact, he says. There are big claims hanging around that will have an impact on rates, maybe as early as next year. “The level of reductions of the last two or three years may not be sustainable,” he says.
While business owners are going to be essentially tied into renewal cycle, he advises people to ensure they have good risk-management procedures in place to make sure they are offered better rates.