The changing face of insurance in Australia

05/12/2018 - 09:24


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Ruth Cohen interviews Peter Chapman, General Manager of Expense Reduction Analysts Asia Pacific’s Insurance Team.

Peter has extensive experience in working with clients to evaluate the most effective approach to structuring their insurance needs. He has achieved excellent outcomes for them resulting not only in premium reductions but, just as importantly, removing any gaps in their current insurance programme and improving overall coverage. His experience enables him to interpret and analyse complex and baffling insurance sector terminology to give his clients clear and concise information to enable them to make an informed decision around their insurance coverage and expenditure.


Peter, we have heard that directors and officers (D&O) liability insurance premiums are rising. Can you tell us more about this?

Financial and professional liability pricing continues to increase at double-digit rates on average, with the largest increases being for financial institutions’ D&O coverage following several large losses and the ongoing Royal Commission.


Are there any other rate rises to watch out for?

  • According to Swiss Re’s latest forecast, they predict a 6% increase for Australian commercial insurance in 2019.
  • Rates will continue to harden, particularly in short-tail lines like property.
  • More specifically, premium growth in motor and property lines has been mainly rate driven due to poor prior year’s performance.
  • Liability lines are also expecting rate increases due to rising class actions, and together with possible capacity reductions, will lead to further hardening of rates.
  • Business Interruption (BI) is predicted to be a main driver of sector growth as many companies are yet to take out this coverage.
  • Swiss Re says that cyber risk is increasingly becoming a main source of BI potential. Measuring financial (BI) losses, especially those sustained by large complex risk managed operations, remains a challenge to insurance risk professionals.
  • Australia, once again, had the largest price increases based on the previous quarter.

Market capacity remains strong in most product areas, limiting overall price increases.


The big news is the imminent takeover of JLT by Marsh. What does this mean for the market in Australia?

The Marsh/JLT deal is still subject to anti-trust and financial regulatory approval. However, the new group has already announced the merger of the Marsh-JLT speciality business which areas include: energy, credit, marine, financial, professional construction and aerospace. 

The acquisition of JLT by Marsh will make the merged company Australia’s largest insurance broker. Early indications suggest a 2-5% headcount reduction across a global network workforce of 75,000. However, it is unclear how will affect the Australian combined operations. Expected annual cost savings/synergies are estimated at US$250 million over the next 3 years. There will, however, be a one-off integration cost of approximately US$375 million.


Can you tell us more about the situation with local government insurance, where JLT has most of the market?

One of JLT’s prime niche sectors in Australia is local government.  Whilst there are some other competitors around, JLT/Marsh should remain the dominant player in this market sector for the foreseeable future.


What about cyber cover—is it still relevant?

Cyber protection is still a very hot topic. The Office of the Australian Information Commissioner (OAIC) reveal that cyber breaches continue to increase, with 245 notifications of breaches for the period July to September 2018: 57% of the incidents caused by malicious or criminal attacks, and 37% of attacks were due to a human mistake.

The Privacy Commissioner said that the sending of personal information to the wrong recipient accounted for 20% of data breached over the quarter. According to Gallagher (insurance brokers), it is only no longer a matter of if your business will come under attack, but when.


What is the best way for a company to ensure that they achieve the best possible premiums?

The Expense Reduction Analysts Conceptual Tender is our preferred model is for participating insurance brokers to undertake, providing better financial results. It gives our clients a response on a far more in-depth level of results. An insurance tender is very different from other tenders because there are so many variables involved, such as sums insured, claims history, policy wordings. A properly constructed conceptual tender will focus on the service offering of the incumbent and alternative brokers invited (to tender) as well as a robust review of wordings, limits, premium costs and the program structure consequentially reducing risk and cost.


About Expense Reduction Analysts 

We help clients to support the health and growth of their business, whatever its nature, focusing on proactive expense and supplier management. As an Australian and global company, Expense Reduction Analysts can benchmark costs and spending, follow the latest supplier innovations, and have real-time data on changes and advancements. This strength gives Expense Reduction Analysts the recognition and power needed on supplier markets to best serve your interests.

For more information please contact Ruth Cohen at


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