Why is Insurance Becoming So Expensive?

Where Are We Now?

Why are we in a Hard Market

• Financial Lines

• The KBI Profiling Process
• Common Challenges Clients Face

One of the high-level reasons for this is related to something that most people don’t know – insurers actually buy their own insurance, called “re-insurance”. Catastrophic claims across the world hit this re-insurance layer, causing the re-insurers to increase rates and apply cover restrictions, which then trickles-down to the consumer level across the world.

This translates to an estimated loss ratio (claims paid versus premiums collected) of over 200%, while most insurers try to operate around 60%. There have also been serious claims hitting Professional Indemnity policies across several different industries, such as the legal, engineering and property services industries.

• Commercial / Strata Property
• Directors and Officers & Management Liability
• Professional Indemnity
• Workers Compensation

With this market shift in mind, KBI have been proactively working with insurers to build solutions, as well as with our clients to implement proactive risk management practices to maximise their policies. Insurers are now scrutinizing their portfolios more than ever and if they don’t feel comfortable with a risk they will price on the side of caution – if they agree to offer insurance at all.

• Engineering firms in all areas, including mechanical, electrical and mining enginers, design and fabrication
• Professional Advisory Firms, including corporate advisors, company secretaries, etc
• Investment Managers
• Architects
• Surveyors
• Builders

• Resources Sector
  We find that firms operating in the resources sector are at a higher risk due to the activities they are performing and the insurance requirements that are needed but not always met.

• Contracts
  We also encounter situations where liability is be buried deep into contractual agreements between Principals, Contractors and Sub-Contractors. On reviewing Professional Indemnity policies, it’s not uncommon for us to find a policy with multiple exclusions and although ‘the box is ticked’ with a policy in place, the policy holder does not have any cover at all.

• Multiple Jurisdictions
  During reviews of insurance programs, we also hear of the problem’s businesses face when trying to find correct insurance with the multiple international jurisdictions they might be operating in.

• Broad Industries
  Some industries can be painted with a single brush by the insurers. Engineers are a good example of this, where insurers have bad claims experience in one sector (such as geotechnical engineers) which causes others to be affected by that experience.

The market shift is seeing so many revisions to policy wordings and business owners are often put in a position where insurance simply will not be there for them when it’s needed.