A total 37% of Australian business owners and managers have lowered insurance premiums and sums assured during the past 12 months. Some 29% have opted to maintain insurance premiums at the levels of the previous year, lowering the amount of insurance coverage. 24% of business owners and managers increased premium payments to retain the protection levels and assets. Approximately one in four has excluded provisions in pervious policies to lower or minimise premiums.
Among consumers, 21% have lowered their insurance premium payments and coverage, with a further 42% maintaining premiums and accepting lower sums insured.
The primary reasons nominated for the increased prudence in insurance coverage and payments were identified to be (in descending order of number of nominations):
- Affordability – response to widespread insurance premium increases
- Lack of value
- Concerns about business cash-flows
- Necessity – availability funds
- Calculated risk taking – decision subject to future review.
A majority of people from both the business and consumer sectors believed current increased premiums were a consequence of recent flooding and wildfire catastrophes. The general consensus was that such “hikes” in insurance premiums were not justified in their circumstances and localities.
Many corporations and individuals are being made to make difficult decisions as a consequence of the ongoing fallout of the GFC (Global Financial Crisis), the Eurozone debt dilemma and the slowing Chinese economy.
Their capacity to pay has been reduced, which has overrided any consideration about their tolerance to risk.
A significant minority of people had investigated and considered alternative insurers. However, only 11% had changed insurance company primarily because of premium increases.
People generally recognise the need for and advantage of insurance coverage. There was widespread recognition of their inability to fund what they believed was optimal protection. In the words of one corporate executive: “we are currently walking a tightrope”.