Three in four SMEs expect insurance price hike

Three-quarters of Australian SMEs expect their insurance premiums to rise over the coming year with 54 per cent anticipating an increase of more than 10 per cent, signalling a change in purchasing behaviour in response to price rises.

This is according to Suncorp's Vero SME Insurance Index, which surveyed 885 small to medium business owners and insurance decision makers. The survey found that while attitudes to insurance were more relaxed compared to last year, price hikes were more likely to impact insurance purchasing behaviour.

This was highlighted by the eight per cent drop year-on-year in the number of SMEs indicating they needed to review all insurance options before making a decision, to 68 per cent of all SMEs. There was also a 14 per cent fall year-on-year in the number of SME owners who personally researched the insurance needs of their business, to less than half. Additionally, fewer business owners (down five per cent to 45 per cent) were wary of the insurance industry in light of recent events such as natural disasters.

"Extraordinary natural disasters in Australia and New Zealand in late 2010 and early 2011 led to added scrutiny of the insurance industry. While last year's SME Index reflected this, it also showed that the vast majority of SMEs were happy with their insurance. The 2013 report suggests the industry may be recovering, with more relaxed attitudes towards insurance as the memory of these disasters becomes more distant.

"While this appears to reflect a return to normality, there remains a need for brokers to promote value and credibility."
The report also added that the expectation of price hikes may signal concerns about future increases, irrespective of past events.

"Many SMEs appear to have reached breaking point in terms of what increase in insurance costs they can bear.
"Influences affecting this include more intense market competition. SMEs are also suffering from increased pressure on margins from both price competition and cost pressures. Insurance price increases are a component of this."

Other key findings include:

  • 15 per cent of SMEs are less likely to absorb/pass on increased insurance costs, while 23 per cent are more likely to do the same thing.
  • 43 per cent of broker clients expect to reduce their amount of cover or number of things covered in 2013, while 23 per cent would change insurer.
  • 37 per cent of SMEs said that price was the biggest reason for changing or leaving their broker over the past five years, up from 29 per cent the previous year.

The full report can be viewed here.

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