Recent events and insurance company results have caused all underwriters to adopt a more conservative approach when assessing risk, writing new business, and renewing existing policies.
There has been a significant hardening of the insurance market, and many classes are seeing increasing premiums and restricted cover being imposed. This article provides Australian Private Hospitals Association (APHA) members with a better understanding of some of the challenges ahead.
For several years market conditions have been favourable for buying insurance. Some risks have been challenging, although generally there have been multiple options and capacity available for most industries, including healthcare. However, drawing on similarities between the stock market and the insurance markets, they both have peaks and troughs from time to time. The old saying that the stock market goes ‘up by the stairs and down by the lift’ is reversed in the insurance market, which tends to go down by the stairs and up by the lift.
These effects are now starting to have an impact. Lloyds, the largest insurance market, where most of the world’s insurers and re-insurers are involved, has introduced restricted underwriting guidelines. Australia is now seeing the effect flow through to all insurers here from the worlds’ biggest to the smallest specialist companies.
To highlight the underlying issues for Lloyds, their underwriting loss for the 2017 period was £3.4bn or Australian $6.15bn. A Lloyds review indicated poor underwriting performances across a number of sectors. One of the measures put in place following this review, was that unprofitable areas have to demonstrate a realistic route to sustainable profit. This indicates that insurers will increase rates and move away from risks that have underperformed, and/or reduce their capacity for certain risks impose tougher underwriting conditions.
Whilst the Australian market has in no doubt entered into a harder market, strong insurer relationships means Gow-Gates are well positioned. Having a strong broking team, with depth and specialist knowledge in most areas, knowing the private hospital sector, and experience over many years in the insurance markets is proving to be invaluable during these times. Gow-Gates is also a member of the Australian Group Steadfast (ASX200), the largest producer of insurance premiums (annually over $6bn) in the Australian market, and this gives the company additional market leverage if required, and ultimately a competitive position at all times.