Uncertainty Abounds

What Owners’ Corporations and Strata Managers can do to keep the costs of insurance sustainable.

Six natural catastrophes have been declared since September 2019, with insurance claims expected to total more than $4 billion (Source: ABC News 13 February 2020).

While it is too early to tell how insurance premiums will be impacted by the summer catastrophes, there are signs of a further hardening market. Most insurers have already increased their rates by a minimum of 15-20 percent across their portfolio. Insurers have become far more cautious and selective on any risks that have an unfavourable claims history, cladding or defect exposures.

Although premiums are on the rise, properties that have been well maintained and have good claims histories will get more favourable terms from the insurers. Therefore, it is more important than ever to have comprehensive risk prevention and mitigation measures in place, such as regular maintenance, checking waterproofing, updating flexi-hoses and proactively rectifying defects and hazards. While effective risk management measures protect the Owners’ Corporation from all kinds of risks, it is just as important to have the right insurance coverage.

It is a worthy investment to engage an experienced broker who holds expertise in risk and insurance advisory. Obtaining a suitable coverage at the right premium is not as simple as sending out multiple quote requests and obtaining terms from the market. While Strata insurance is a package policy, it does not mean every client should get standard cover, because every risk is different, and every client is unique.

An experienced broker provides tailored advice instead of generic comments. To achieve this, an experienced insurance broker needs to: 

✓ Collect the relevant risk information which goes beyond just basic construction, fire protection information and claims history.

The information assists the broker to analyse the risk profile and understand the client’s objectives. 

✓ Analyse the risk profile and identify the exposure, considering the past claims patterns and identifying any areas where potential claims may occur. The broker needs to review any past risk surveys, risk recommendations and requirements and highlight any actions taken in the past to improve the risk or mitigate the losses.

✓ Select the right level of policy coverage to suit the risk profile and exposure, including an effective Excess structure. More often than not, certain trade-offs have to be made to keep the balance of being cost-effective and having the right level of protection. 

✓ Present the risk in a truthful and favourable light and apply tactful negotiation skills to achieve the best outcome. The presentation of the risk will influence how the insurers will underwrite it. 

✓ For high hazards, which are therefore classified as hard to place risks, an experienced broker has the capabilities to think beyond the boundary of strata insurance and find a suitable solution from a broader market when it is required. 

✓ Start the renewal process early to allow ample time for thorough preparation, presentation and negotiations. No client likes to feel as though they are being left with no choice but to pay a significant increase due to a hasty turnaround.