Proclaim celebrating our 20th year: From the archives – a May 2001 article from the Financial Review on the liability market.
You do have to possess a certain amount of ‘experience’ to remember the last hard market….but yes, some premiums went up more than tenfold, and some risks were pretty much uninsurable. Are we inching closer to a firmer market now? We are seeing it in pockets, and recently I had a discussion with an underwriter about whether some more extreme risks – like trampoline centres (that have proliferated in Australia and UK in recent times) – may be considered too risky for conventional insurance liability arrangements. We hope it doesn’t get to that point but we do recommend sharpening the focus on risk and claim management – from experience!
Insurance becomes major liability – 26/05/01
AFR News – 26.05.01
The owners of one small shopping centre in North Queensland have just received their latest public liability insurance premium. It’s $90,000 – a huge increase on the $7,000 they were paying just two years ago.
Some of the extra cost will be passed on to the tenants, but a substantial proportion of the increase will be worn by the landlord, potentially depressing the return on the investment by up to 100 basis points.
Even before the collapse of HIH, public liability premiums were rising strongly, affecting all property owners, from those with strata apartments to the institutions that hold CBD office towers.
Mr Peter Harmer, the CEO of the country’s largest risk management and insurance broking consultancy, AON Risk Services, said the trend was definitely up and, while the amount depended on the manager, increases of 25 to 40 per cent were “not uncommon”.
Most affected are the private owners, who are unable to access the all-encompassing insurance policies available to the institutions, and the shopping centre owners who are experiencing a repricing of the “slip and fall exposures”.
Mr Dale McDermid, the joint managing director of retail property specialist Byvan, said public liability insurance was becoming a major issue for shopping centre owners and would ultimately affect returns.
“Very few insurers in Australia are prepared to underwrite public liability risk,” he said. “Smaller owners are having trouble getting any cover and, for some, premiums have more than doubled.”
Mr Justin Harty, general manager of Melbourne-based specialist claims manager Proclaim Management Solutions, said that, next month, a number of shopping centre owners would face a considerable increase in base premium.
The premium is not the only issue. Many owners are finding that for the first time they have to pay the first $10,000 to $25,000 of any claim – called the deductible in industry parlance.
The costs are forcing owners to look hard at the risks in their centres and consider proactive management of claims.
Mr McDermid, who oversees the management of 145 shopping centres around the country, said shopping centre owners needed to introduce “best practice” for risk management.
Agreements with cleaning contractors have been tightened to ensure that standards are met. And in some cases, shopping centre owners are attempting to pass the insurance risk onto the contractor.
Australian shopping centres may soon introduce similar measures to those in the litigious US, including more low-impact carpet and more video surveillance.
A number of shopping centre managers, such as Centro Properties, MCS and most recently Mirvac, have turned to Proclaim Management Solutions to minimise their deductibles.
Proclaim’s Mr Harty said that 90 per cent of claims were legitimate and needed to be dealt with proactively, cost-efficiently and in a non-adversarial manner.