The index found that premiums had taken a five point bump which brings rates back to the same level as Q4 2013/14 but rates are still 21% down compared with the first quarter of 2002/03.
The increases are great news for brokers as Michael Gottlieb, managing director of BizCover, told Insurance Business
that the market may have reached its bottom.
“It’s great news for brokers as prices seem to have found a floor,” Gottlieb said.
“However, I expect pricing to bounce along the floor and do not expect and material uplift in rates in 2016. It would take a significant withdrawal of capacity for rates to harden materially.”
The index found that the major driver behind the increase is the hardening of rates in the nonprofessional sector as public liability and business packs, predominantly covering perils and theft, rose 4 points.
Gottlieb noted that retail was the hardest hit sector as some in the space saw 10% increases in rates.
“In the retail sector, while there is significant capacity, the level of competition is not as great,” Gottlieb explained.
“This is because of the greater level of infrastructure required to write this style of insurance. Insurance for the retail sector is more complex to price due to the vast number of variables that impact the risk of that type of business.
“There are relatively few insurers in Australia that have sufficient data to technically price risks based on geographical location, type of business and the physical structure of the building.
“Furthermore, claims in this sector mostly involve physical property and thus require access to a large number of professionals around the country who can assist in assessing the claim and helping the business get back to the position they were prior to the claim.”
The news may be good for brokers but Gottlieb warned the soft market may continue for some time before rates reach their 2012/13 peak.
“I think we still have many quarters of a soft market ahead of us,” Gottlieb continued.
“In order for rates to move up across the board we are going to need a substantial withdrawal of capacity, and that is unlikely to occur unless there are significant unforeseen events that have not been budgeted.
“While the bottom may be insight, there is no immediate pressure that will see rates increase in the short term.”
The quarterly BizCover Small Business Insurance Index has found premium increases in the second quarter of FY15/16, the first increase in ten quarters.