The Australian insurance industry market changes this year will have a major impact for those professions who have Professional Indemnity Insurance in Australia. 2009 showed signs of another hard market in all areas of insurance with considerable losses reported and profitability being offset by small premium increases, with more to come in the upcoming years. A JP Morgan report indicated the return of a hard market with fewer insurers out there. Also, they suggested that the increase in claims are hiking premiums for Professional Indemnity Insurance with increases not seen since the 2001 market fiasco.
Some industry news have emphasized the opinion that insurers will be forced to return to profitability after years of losses and falling premiums as they tried to compete in a soft market with global competitors. In recent times, a leading insurer AIG changed their name due to a public relations fiasco, which involved millions in bonuses paid out to representatives in areas believed to have incurred over 160 billion dollars in losses.
The effects of a hard market may be mitigated in some measure by competition from global insurers however profitability is a mandatory in the current economic climate even for international insurers and significant increases are a definite in areas such as Professional Indemnity Insurance.
In December of last year, the Australian Securities and Investments Commission approved new guidelines for the FOS and in January, they took effect. Prior to this, complainants were only able to access FOS services to a maximum of 280,000. In January, the limit was raised to 500,000 the limit is raised also for clients of insurance brokers up from 100,000 to a maximum of 500,000. In addition, interest and penalties could be added to award amounts.
Those who rely on Professional Indemnity Insurance could certainly see rate increases related not only to increased risks and to potentially more expensive awards, but also almost certainly in response to pressure to offset losses in other areas. Fewer insurers are willing to take the risk and step into potentially shaky fields and this is predicted to result in markedly higher premiums, insurance being harder to obtain, and in general the insurers taking a stance to lower risk and increase profitability.
Changes in the insurance field are said to be by some, a return to financial responsibility and profitability, but the impact on those required to hold Personal Indemnity Insurance may be further financial hardships and a struggle to retain or achieve profitability in these hard times.
In time there will be more evidence on whether the market changes and increased premiums will benefit all, though the falling premiums for all insurance over the last several years have placed the insurance industry and many insurers in an rocky position.
Industry analysts are quiet about the exact rate professionals can expect to see over the next few years but there is a reduction in capacity expected as well as premium rates and increases up to 30% have been speculated as possible for across all classes including Professional Indemnity Insurance.
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