January 2023 Market Update – Claims
New South Wales
- $29.8M (in claims’ quantum) actively being managed
- An average of 23 claims settled per month
- $5.6M in payments over the past 12 months apportioned by product class as follows:
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- Property – 28%
- Public Liability – 10.4%
- Professional Indemnity and Financial Lines – 27.5%
- Combined Motor – 18.7%
- Combined Travel – 6.6%
- Strata – 10/182 – 5.5%
- Marine – 2/182 – 1.1%
- Motor / Fleet – 18.4%
- Property / Construction – 22.6%
- Public Liability – 12.7%
- Professional Indemnity and Financial Lines – 27.4%
- Strata – 7.6%
- Corporate Travel – 5.7%
- Marine – 1.9%
Queensland
- Over $30M in claims currently managed by Bellrock QLD
- An average of 10 claims settled on behalf of QLD clients per month
- $11M in payments over the past 12 months apportioned by product class as follows:
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- Motor Vehicles Private / Commercial / Fleet – 5%
- Business Property – 88%
- Home property – 5%
- Marine – 8%
- Motor Vehicles Private / Commercial / Fleet – 12.5%
- Business Property – 25%
- Home Property – 5%
- Public Liability – 50%
- Strata – 1%
- Travel – 2.5%
- Marine – 4%
Specific to claims paid from the NSW and QLD flood events of 2022, Bellrock finalised claim payments twice as fast as the industry average (for further details see our article here). We can confirm:
- At 10 June 2022, 40% of all notified flood claims have been settled (in contrast to the industry standard of 20%). Bellrock’s closure’s rate has since increased to 75%.
- Bellrock has managed paid losses at an average of $487,300 per claim. The industry average is $20,000.
Trends in claims
In terms of claims activity over the past 12 months, there continues to be a significant increase and awareness in terms of Cyber Liability Insurance (see our guide to Cyber Liability Insurance here).
In our previous Market update dated June 2021, it was estimated that Australian businesses will have spent in excess of $7.5B on cyber security in 2021.
As at September 2021, the Australia Cyber Security Centre confirmed that it had received around 67,500 reports of cyber incidents in Australia for the previous financial year with losses totalling more than $33B to Australia businesses.
In the Annual Cyber Threat Report 2022, the ACSC reported that is received over 76,000 cyber crime reports, an increase of nearly 13 per cent from the previous financial year.
As per ACSC data, there has also been a rise in the average cost per cyber crime reported to over $39,000 for small businesses, $88,000 for medium businesses, and over $62,000 for large businesses. An average increase of 14 per cent.
See our article here on recent high profile data breaches and related impacts.
Another area where increased claims activity has been observed is across strata insurance.
Aside from claims arising from the significant storm events throughout 2022, we have also seen an uplift in “legal expenses” claims. There are disputes between unit owners and Building Management Committees and, or Owners’ Corporations. Building defect claims remain afoot including from new builds and renovations to strata complexes (including disputes for failure to obtain planning permission). See our recent article on this topic here.
There continues to be increased scrutiny across all parts of the industry. There was no downturn in claims activity in 2022. Additional challenges have also emerged in the building industry and consequently for insurers of developers, contractors and building professionals.
We refer to these challenges in the following recent articles:
A noticeable increase has also been apparent in terms of “Worker to Worker” claims over the past 12 months.
- Employment practices liability, particularly unfair dismissal
- Regulator claims, particularly across financial services licensees and for directors of publicly traded companies
- Claims within the construction industry in terms of developments and product selection, defects and certification.
Following on from our last market update there has been a continuation in terms increased severity and frequency of major weather events, with the last 12 months seeing a continued onslaught of property claims primarily arising from severe weather and flood.
- February 2022: On Monday 28 February 2022, the Insurance Council of Australia (ICA) declared an Insurance Catastrophe for Southeast Queensland and parts of NSW as a result of record breaking severe weather and flooding which occurred between 22 February 2022 and 9 March 2022, with a reported 23 deaths.
Impacts: A total of over $5.72 billion in insured losses have been incurred to date incorporating 239,000 claims with an average payout of $23,000 with a current closure rate of 73.9%. This is the costliest flood in Australia’s history and fourth most costly disaster overall. The cost is almost double that of the 2011 Brisbane flood, which saw $2.3B in insured losses. - July 2022: On 5 July 2022, the ICA declared a “Significant Event” (SE) for the region of New South Wales. Whilst this flooding event most significantly impacted communities surrounding the Hawkesbury and Nepean Rivers, all regions impacted by flood fell under SE declaration. This was the fourth largest scale flood event for some Western Sydney communities over a two year period.
- October 2022: On 19 October 2022, the ICA escalated its significant event declaration to an Insurance Catastrophe for regions of Victoria, Tasmania and NSW impacted by severe weather and flooding since 12 October 2022.
Impacts: As per current data, a total of over $569 million has been incurred to date, incorporating 19,000 claims, with a current closure rate of 27.8%.
Data shows that the cost of natural disasters is real, significant, and growing. Since the 2019–20 Black Summer bushfires, insurers have paid out more than $13 billion in natural disaster claims from 11 declared catastrophes. It is estimated that more than 9 million Australians have been impacted by a natural disaster or extreme weather event over the last 30 years.
This is not just an issue that impacts those directly impacted by extreme weather, but as per recent research undertaken by the McKell Institute for the ICA shows, the February–March floods cost each Australian household an additional $525 in premium. See our article here for further details.
Collectively governments, stakeholders and insurers must develop solutions to combat these growing challenges, giving consideration and priority to reducing Greenhouse Gas Emissions and investing in resilience. This can only be done by identifying and adopting policies in the short, medium and long term to alleviate the dangers faced by local communities and the cost of rising insurance premiums.
On 9 February 2022, legislation for the Northern Australia Reinsurance Pool scheme for cyclones and related flood damage was introduced into the House of Representatives and was passed through the Senate on 30 March 2022.
As detailed in our article of 3 May 2022, the government implemented a reinsurance pool which was established on 1 July 2022 and backed by a $10B, annually reinstated, Commonwealth Guarantee, with over 880,000 small businesses, residential and strata insurance policies being eligible for this scheme. The pool operates Australia wide, but targets support to cyclone-prone areas, and provides reinsurance for insurers operating in those areas.
Regarding COVID-19 related issues, there remains a significant and wider impact on the insurance industry across all insurance products. Whilst most claims have focused on the hospitality and travel sectors, the most notable and well publicised relate to the two Business Interruption “which were both litigated in the High Court. However, there continues to be wider implications such as potential claims against Directors & Officers and Company Liability in terms of responses to COVID-19, mismanagement of company finances, continuous disclosure, insolvency, unfair dismissal and claims brought by regulatory authorities by way of some examples.
In reality, the aftereffects of COVID-19 continue impact a broad spectrum of insurance products.
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