The BizCover SME Insurance Price Index is at its highest level since Q3 FY14 due to the ongoing hardening of the commercial insurance market.
The latest quarterly research from BizCover shows that the overall increase in Q4 FY21 was driven by a 2.1% rise in the price of insurance for the trades sector and increases in the price of public liability insurance across all sectors.
Despite this high level, overall pricing through the BizCover platform remains within the same +/- 11% range, the same range as when the index started in 2012.
“This tight pricing band has been the result of a number of factors balancing each other out,” said Simon Schwarz (pictured), BizCover’s CFO.
BizCover describes its Insurance Price Index as Australia’s largest online marketplace for SME insurance across the largest range of insurance carriers, commercial insurance products and occupation classes.
Read more: Rising premium prices in latest price index
Schwarz said there have been steady increases in the price of certain insurance offerings in the trades sector for a number of years and in the retail sector since COVID.
“However, these have been offset to some degree by a steady decrease over the last few years in the price of public liability insurance for the retail sector and generally flat pricing of public liability insurance for the trades sector and professional indemnity insurance for the professionals’ sector. This is notwithstanding fluctuations or increases in individual quarters, including in the most recent one.”
He said COVID had significantly impacted SME insurance rates in the retail sector.
“The Retail Index was steadily decreasing from Q2 FY17 until the beginning of COVID in Australia in March 2020, from which point the Retail Index has increased over six quarters to its FY17 levels again,” he said. “This is driven by material increases in the price of the contents section of business packs for the retail sector.”
In the most recent quarter, the price of business interruption insurance for the retail sector increased to its highest level since the start of the index.
“The price of the contents section of business packs for the trades sector has also increased materially since COVID in Australia from March 2020. However, this has been offset by flat pricing for public liability insurance for that sector over that time. The result is that the overall price of SME insurance for the trades sector has only increased marginally over that time,” said Schwarz.
He added that feedback from SME customers shows that many are looking to cut costs on expenses like their commercial insurance.
“At the same time, insurance brokers may be struggling to make their small SME clients ‘profitable’ for them, given the amount of time and effort it takes brokers to complete transactions through traditional procurement processes. The amount of broker commission earned on small premium transactions is often outweighed by the time and effort taken to complete those transactions,” he said.
Schwarz said that brokers can play an essential role for SMEs who need advice and advocacy, and for those who want to minimise their costs.
“Brokers should be looking to streamline their SME books by utilising online platforms which can reduce the time spent on quoting and binding for their SME clients and making them more profitable,” he said.
He added that some platforms allow brokers to procure and bind quotes for clients in minutes from a range of leading insurance carriers.
“This allows brokers to focus on the more valuable advisory and advocacy services that their SME clients cannot obtain through online direct channels. So, they can retain their clients while cutting out the time and effort wasted in traditional procurement processes that usually make small premium transactions unprofitable for the broker,” said Schwarz.