2022 Market Update – Casualty (General Liability)

2021 was a year of stabilisation for the Australian casualty insurance market. Rate increases are slowly but steadily reducing whilst underwriting appetite and availability of capacity remain largely comparable to this time last year. Although there is still scome way to go before we see consistent rate decreases and possibly even a softening of the market more generally, there are optimistic signs for the casualty market heading into 2022.

In our half yearly update we observed that the average annual rate uplift for casualty was between 10% – 15%. Pleasingly, over the past 6 months this has reduced to 5% – 10%. It still remains that claims affected and high-risk businesses may attract exponentially higher rate increases. However, our experience has been that most “hard to place” risks have already undergone significant rate correction and revision of scope of cover during the course of the hard market cycle, following which, there has been consistency in pricing and cover.

Personal injury claims brought by non-employee workers, such as contractors and labour hire, remains a focal point for casualty underwriters. Referred to as “worker to worker” claims (see our article here) these losses are costly and time consuming to defend, even when successful. There is no slowing down in worker to worker claims’ experience. Casualty underwriters continue to seek rate increases where there is an acute worker to worker exposure, and significantly higher deductibles. Prior to the hard market, an SME or mid-market policyholder might have a worker to worker deductible of $1,000 – $5,000. Now, it is standard to see minimum worker to worker deductibles of $25,000. For large, manual labour industries they can be in the hundreds of thousands.

In taking this approach, insurers are requiring policyholders to have “more skin in the game” for injury claims, resulting in businesses adopting a greater focus on work, health and safety policies and procedures, and contractual risk management practices.

The approach is the same across all high risk industries, whether it be exclusions in relation to assaults for licensed venues, sexual assault at aged care facilities, non-conforming building products and corresponding high deductibles. Insurers are putting the onus on policyholders at first instance to transfer risk. They intend to support businesses that take a proactive approach to risk management.

COVID-19 exclusions are now ubiquitous for all policy classes. Two class actions have already been filed in the Victorian Supreme Court, alleging failures of the hotel quarantine system, and the various Workers’ Compensation insurers have confirmed that contracting COVID-19 in the course of an employee’s work will be treated as sustaining an injury at work. As it is currently an uninsurable exposure, businesses need to ensure that they have adhered to Government advice and regulations, and considered whether further best practice measures can be implemented to minimise the exposure.

It remains the case that detailed and well-planned underwriting submissions receive the most favourable treatment from underwriters. One shopping centre owner may supply documented cleaning logs, copies of their contracts, provide a documented repair and maintenance program, and install CCTV, in order to demonstrate they have properly considered the risk of injury to the public. Another shopping centre owner may simply provide their updated annual turnover figures. It is obvious that underwriters will prefer the more detailed underwriting submission: further, they are under increasing scrutiny when it comes to presenting a sound underwriting case internally, to justify the policy limits being outlaid. For certain high risk and claims affected businesses, demonstrating robust risk management in this way can be the difference between obtaining cover and being deemed uninsurable.

For most policy classes we are finding that underwriters are now proactively seeking new opportunities, whereas for the past few years the focus was cautious and centred on remediating existing portfolios. We are hoping this trend will continue into 2022 as more competition will result in improved market conditions for policyholders.