A broker claims that clients in one part of the country are sometimes being forced to accept insufficient coverage on their homes in order to cut costs, following significant increases in premiums.
Sarina Insurance and Financial Services' Rick Davis, based in Sarina just South of Makay in Queensland, told Insurance Business
he is concerned that clients are accepting insufficient coverage to cut costs.
Likewise, he said clients are risking their premium increasing significantly on renewal or not being renewed at all, as a result of a lack of appetite for a period of time for business in the region from insurers.
“The client comes back to us, expecting to get a quote of around $10,000. However, they’ve usually broken the continuity with their previous insurer, so when they step back in they’ve lost the grandfathering discount and their premium is 20% higher again," Davis said.
The problem is leaving local insurance brokers in the region such as Davis bending over backwards to find an acceptable balance between price and coverage to keep clients covered.
“We work with them to find ways [to reduce the premium], such as taking out parts of the cover," he said.
"Some people want to take out contents entirely – I tell them I can’t let them do it, it exposes them too much,” he said. “I then look at excesses, payment plans and so on – whatever we can do within the policy."
Davis said a typical home and contents policy with an annual premium of $1,500 three to four years ago has more than doubled in cost, with premiums coming in at $3,500 to $4,000 per year, making cheaper quotes from direct insurers tempting.
“We saw huge increases in 2012-13, and 2013-14 wasn’t good either,” Davis said. “Farmers are ringing up exasperated with our renewal premium of $10,000, especially when they can get a phone quote from a direct insurer of $1,200.”
Davis said insurers do understand the problem, giving the example of Vero
, which has allowed a maximum excess up to $10,000 - up from $2,000 - to make it more affordable for clients.
"However, they’re still playing ‘catch up’ from the recent natural disasters," Davis said.
Premiums seem to have stabilised this year, with many renewals flat and some even reducing. However, Davis warned that another large natural disaster could start the cycle again.