How to Reduce Your Commercial Insurance Costs


Higher excesses, increasing premiums and narrower coverage have become a reality for many businesses in Australia. Australian businesses have enjoyed a softer insurance market for some years, but a change is on the horizon. Fortunately, there are some ways that small to medium businesses can prepare for a harder commercial insurance market.

Understanding the Differences Between a Soft and Hard Insurance Market

The nature of the insurance market is driven by availability. If there is lots of capital entering the market, it is easier to obtain cover as insurers chase business. A softer market translates to lower commercial property insurance premiums, broader coverage, narrow exclusions, discounts, and smaller excesses.

On the other hand, a hard market occurs when there is a decreased availability. This drives lower policy limits, wider exclusions, bigger excesses, higher premiums, and narrower policy coverage.

Unfortunately, certain parts of the insurance market in Australia are already showing signs of hardening. There are already insurers not supporting certain risks, such as coverage for investor claims or directors.

High Risk Property is Starting to be Harder to Place

There are risks that affect commercial property insurance, particularly around buildings. This applies particularly to buildings that are poorly maintained, left unoccupied or in a generally distressed condition.

Additionally, businesses and professions with a history of losses are more likely to finding it difficult to source the kinds of coverage they require.

Taking Advantage of Softer Market Conditions

There are two significant ways to take advantage of softer market conditions; locking in premiums and excess savings or by securing higher policy limits or broader coverage now if it will be needed later.

For example, if you have cover for $2 million and you know you will soon need to expand it to $5 million, it may be easier to obtain this now, making it cheaper in the long run. Your commercial property insurance brokers may be able to lock in a favourable future renewal.

Preparing Your Business

There are ways to ready your business for harder market conditions. The first is to factor in the increasing costs. The cyclical nature of the insurance sector, means you’ve probably been taking advantage of the current state and may already be saving for the more expensive premiums, lower policy limits, narrower coverage and higher excesses in the future. If you’ve not, it is time to start factoring these costs, budgeting for the increases to maintain adequate cover.

The second method is to establish a long term relationship with a reputable commercial insurance broker. A good broker will not only have long term relationships with a variety of insurers, but also understand your business to secure you the best cover for your unique circumstances.

A great broker will prove invaluable in a harder market when the policy wordings tend to be narrower, excesses are bigger and limits or lower. Your broker will also act as your advocate should your claim be rejected.

If you are in need of commercial property insurance, be sure to speak to us. The GSK Insurance team specialise in commercial insurance, and we’d be delighted to help.

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