The insurance industry is going through a turbulent time.

The pace of change is rapid and the market is hardening, which means insurers are lifting premium rates as they endure the vicissitudes of a pandemic, natural disasters, legislative reforms, and other factors.

Law firm Clyde & Co has prepared a report that highlights key trends confronting the insurance market. You can read the full report here [PDF 7.3MB].

JMD Ross Insurance Brokers has highlighted several of these trends that will likely impact on clients.

Business interruption and Covid-19

Covid-19 remains a major driver of potential property claims and particularly the business interruption element of policies.

There are test cases running in Australia to determine a range of issues. The outcomes will likely influence how insurers manage claims.

Primarily, the cases focus on specific references found in insurers’ policy wordings. Many exclusion clauses still refer to obsolete legislation, such as the Quarantine Act 1908, which was repealed in 2016 and replaced by the Biosecurity Act.

Other salient aspects of insurers’ wordings include the definition of a disease, the proximity of an outbreak to a business, and prevention of access to premises due to government mandates. Read more about the test cases here.

Regardless of the courts’ decisions, insurers are actively adjusting management of their capital reserves, which simply means collecting more premium.

Directors & officers

Directors and officers (D&O) are navigating their way through serious challenges to business continuity while having to adhere to stringent directors’ duties and be ever mindful of the interests of stakeholders, including creditors, shareholders and investors.

Clyde & Co says directors of strong companies will continue to be challenged and those whose companies have existing weaknesses will be exposed.

Despite the Federal Government relaxing insolvency laws, the next 12 months is certain to bring an increase in D&O claims because of Covid-19’s impact on the economy. Lockdowns and travel restrictions have had a devastating effect on many companies and their business models.

Employment practices liability

The non-compulsory nature of the coronavirus vaccine is expected to raise myriad legal questions about employers’ primary duty of care and issues such as employees’ right to choose and whether employers can terminate employees for failing to vaccinate.

Clyde & Co predicts employment practices liability claims are likely to arise as vaccine rollouts proceed.

JMD Ross predicts that work-from-home arrangements and workplace flexibility being the “new normal” will result in some employers coming into conflict with employees.

SME market

The Australian Small Business and Family Enterprise Ombudsman released its final report into insurance industry practices that impact on small businesses in December 2020.

Read Clyde & Co’s full analysis of the report here.

The Ombudsman found far too many small businesses are on the brink of collapse because they cannot secure the insurance they need to operate. The report addresses what the Ombudsman believes is an imbalance in the insurance market.

The Ombudsman makes a suite of recommendations designed to provide clarity and certainty for SMEs, rebalance risks for insurers, and give businesses greater access to the insurance products they require.

To discuss your risk management and insurance requirements, please contact:

• John Davaine M 0413 610 523 E jdavaine@jmdross.com.au
• John G Duncan M 0418 976 772 E jgduncan@jmdross.com.au
• Tim Ross M 0419 251568 E tross@jmdross.com.au

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