Five Factors that affect your insurance premiums

Five Factors that affect your insurance premiums

Most people understand that insurance premiums rise and fall, the questions is why do your premiums change? What factors cause the amount of money you pay to your insurance company to increase or decrease?

If you have to pay higher premiums, does that automatically mean that you have better coverage? If not, what about lower premiums, should you opt for the lowest you can find?

These are just some of the questions that Australians ask about their insurance cover, so let’s dive straight in and look at five of the main factors that can affect the cost of your premiums: risk, coverage, replacement value, fraud and the market in general.

What’s the risk? One of the first factors that an insurer considers when asked for insurance cover is what’s the risk of paying a claim? For example, for comprehensive car insurance, the insurer will ask whether the car is kept in a garage, carport or on the road, and will also consider the type of car, driver’s age and driving history, as well as the owner’s residential location. All of these factors can increase or decrease the risk to an insurer of paying a claim.
What’s the coverage? The amount of risk the insurer takes by issuing an insurance policy will affect the coverage that is offered. If the risk is too high, they may refuse to issue a policy or set the premiums and excess payments high enough to offset this risk. In general, the higher the coverage, the higher the premiums, but this doesn’t always apply, so it pays to talk to an experienced adviser about your coverage options.
What’s the replacement value? Insurers use a base value for the replacement costs, which might be completely different to your idea of how much it will cost to replace your car, motorbike or home. Often you can insure your property for either a predetermined value or for its market value; each option generally has a different premium, depending on the risk to the insurer.
Fraudulent claims: Some people believe that making a claim against their insurance policy will increase their premiums. This may be true if you make frequent claims on the same policy or the insurer believes that you were partially at fault or negligent in some way. Unfortunately, fraud is a huge problem to the insurance industry and to cover their costs, insurers tend to increase everyone’s premiums by a certain percentage, every now and again.
Market factors: Severe storm damage in Darwin will increase premiums for both residential and commercial property owners in this location, flooding will raise premiums in Brisbane and rising construction costs will raise premiums for everyone. Inflation is another big factor in the cost of premiums, as are increased government taxes, the number of claims made within an industry, natural disasters, and regional or global market changes in the insurance industry.

The reason that premiums increase is that the insurer needs to have the money to pay the claims that are submitted throughout the year. If their costs of doing business increase (for whatever reason), they will increase everyone’s premiums to make up the shortfall. Of course, your premiums may rise or fall because of changes to your personal circumstances, which is why it’s important to keep your insurer updated of any changes that might affect your premiums and your claims.

General Advice Warning

The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.

SME Business Insurance

Business Insurance is used by many businesses, but it’s best suited to SME-type operators.

SME Business Insurance

What is SME Business Insurance?

Any business in Australia, including small to medium-sized businesses, will benefit from an added layer of financial security in the form of an SME Business Insurance cover. This provides owners and businesses with protection against financial risks and the loss of key assets. It also protects customers, employees, suppliers, and contractors.

Some types of insurance are mandatory, like Workers' Compensation, Professional Indemnity, or CTP Insurance for motor vehicles – these are called statutory insurance covers. Other types of insurance are optional, but they are important ways of reducing business risk and protecting your finances and assets.

What does SME Business Insurance cover?

Property Damage – cover ranges from fire, storm, lightning and other perils to any type of accidental loss or damage. The property insured includes damage to buildings, contents, stock, plant and equipment, raw materials, and consumer goods.
Business Interruption – covers weekly amounts or net profit loss and ongoing fixed costs following property loss or damage. Also referred to as Loss of Profits or Consequential Loss Insurance.
Burglary/Theft - covers break-in at the business premises and the damage is done, as well as theft of goods or stock;
Money - covers theft of money in various locations (during transit, in a locked safe, or in a private residence) at any time (within and outside business hours).
Liability - covers a variety of statutory and civil legal liability, including personal injury and property damage, environmental liability, management liability, statutory liability, professional liability, aviation, marine and motor vehicle-related liability;
General Property - covers specified portable property against accidental loss or damage once it is taken off the premises, within Australia or overseas;
Equipment - covers sudden internal derangement and accidental loss or damage to plant, equipment and machinery, as well as computer and other electronic equipment. Loss of stock and business interruption cover can also be part of this insurance.
Motor vehicle & mobile plant – covers registered and unregistered motor vehicles, mobile plant & equipment, farm equipment, construction plant, as well as attachments and trailers. This insurance can also cover loss of income, downtime and hire costs of replacement equipment.

Speak to an insurance expert

It is our business to understand your objectives, needs, financial situation and risk profile and provide you and your business with tailored risk and insurance advice.
This is how we work with your business:

1.   We analyse your objectives, needs, financial situation and risk profile to develop appropriate strategies and solutions.
2.   With your input, we undertake risk assessments and conduct market research to determine the most suitable insurance product(s) for your key risk exposure.
3.   Your insurance adviser will present appropriate strategies and solutions and also negotiate and place insurance covers agreed.

Frequently Asked Questions

How can insurance help small businesses in Australia?
- In Australia, small businesses are encouraged to invest in business insurance to help protect their business from costly eventualities like damage to property and liability claims. Investing in a comprehensive yet affordable insurance policy promotes the continuity of the business in times of losses or great financial trouble.
What does SME stand for?
Small-to-medium enterprises (SMEs) are businesses whose revenue, number of employees and assets do not exceed a certain threshold. Each country or industry defines a set of criteria to determine whether an organisation falls under the SME category.
How can insurance help small entrepreneurs or SMEs, or how it relates to risk management?
Risk transfer is one of the treatment approaches in managing risks in business, and insurance is an example of risk transfer. It’s a strategy that SMEs employ to shift a risk or a liability from one party to another when that party specialises in managing a specific kind of risk/liability.
Why is insurance important for business owners?
Getting an insurance policy for your business is important, as it cushions or completely shields you from the hefty costs of certain unforeseen issues (accidents, damages to properties, effects of force), legal claims, and other liabilities. Without insurance, business owners might be forced to foot the bill out of their own pocket.