January 2024 Market Update – Commercial General Liability

Public and product liability insurance premiums in Australia experienced significant uplift in recent years during the “hard market cycle”. Adverse claims trends, social inflation, along with elevated legal and litigation costs have put pressure on insurers’ rating methodology. In the National Claims and Policy Database (NCPD) analysis dated May 2023, APRA stated, ‘the average premium for this insurance product has grown by 40% since 2015, outpacing inflation in Australia.’

Heading into 2024, the outlook is brighter for the general liability insurance market, however, the rising cost of managing claims above and beyond the overall inflation rate is still a key concern for insurers (see our article on Social inflation here).

Bodily injury and worker-to-worker claims where labour hire or contracting/sub-contracting arrangements are involved are also adding cost pressures for this class of insurance. Industries that are driving premium cost increases and have the highest representation of impact, falls and worker claims are mining, construction, agriculture, hospitality, retail trade, manufacturing and transport.

To ensure the best results are achieved, it is essential that policyholders be proactive with submitting robust renewal information and ensure early engagement with insurers. Policyholders who provide quality risk control information on their workplace practices and procedures (particularly for engaging contractors, subcontractors and labour hire personnel) to support lessons learned on past claims performance remains a top priority for underwriters and can assist with securing improved pricing. Organisations where claims frequency is nil or low remain attractive, depending on the type of business operations and activities including geographic exposure.

For well performing risks, we currently recommend our clients budget for flat to modestly increased rates of up to 10 per cent for this class of insurance. High hazard industries with adverse losses and claims experience are likely to come under a great deal of underwriter scrutiny and are set to experience a more challenging renewal environment characterised by material price increases, application of higher retentions/deductibles and coverage restrictions. Proportionate premium increases should otherwise be expected in line with increased business turnover/exposure, as declared.

Traditional exclusions continue to apply under policy wordings for liabilities assumed under contract, cyber breaches, communicable diseases including war and territory restrictions (most recently eliminating coverage in Russia and Belarus). We are starting to observe new insurer exclusions applied for bodily injury and property damage resulting from PFAS liability exposures (per and poly-\fluoroalkyl substances) – also known as forever chemicals including silica. Policyholders in the construction, manufacturing and retail space are likely to see an increase in application of such exclusions and requests for additional underwriting data information related to these exposures in the foreseeable future.

It otherwise remains difficult for religious and educational institutions to navigate the more onerous coverage offered by the general insurance market (compared to coverage held with CCI. In particular appetite is limited in respect of sexual abuse, psychological injury, participation and concussion risk. There is very little appetite to cover these exposures, and the trend has been to look outside the traditional general liability programme toward specific product, particularly insofar as “sexual abuse”.

Competition in the Australian market has been boosted by the recent announcement of US based specialty insurer Markel Group’s intended expansion into Melbourne, Brisbane and Sydney. Increased insurer availability will benefit policyholders who purchase liability coverage as adequate capacity will be available for risk transfer. New entrants also drive market dynamics by generating healthy competition between local carriers.