Brokers expected it. Clients expected it. But the widely anticipated increase in commercial premiums after June 30 isn’t happening because competition among insurers is preventing rates from hardening.

Brokers around the country report little if any increases for commercial clients with a good claims record, although they say insurers are taking a tougher line with others and are increasing deductibles and rates. 

Insurers are also pushing for increases in domestic premiums, but brokers say there is enough competition for them to take clients elsewhere.

Sacrificing profit for market share does not bode well for insurers’ profits this financial year if they cannot pass on the cost of higher disaster claims and reinsurance to policyholders. But many brokers do not see the status quo lasting.

Mark Sandow, MD of Brisbane-based Citycover, has been surprised that prices are not moving more, given the warnings of a hardening market. He says insurers’ desire to write new business and retain clients is keeping a lid on price increases.

Rockhampton-based Piranha Insurance Brokers Principal Peter Peirano agrees, and says the expertise of insurance staff is more of an issue than rates this year. Mr Peirano has seen some insurers categorise his city as a cyclone risk although it is too far from the coast to have cyclone claims. 

Robert Ross, Director of Affinity Insurance Services, which covers the NSW central and south coast, Snowy Mountains and Melbourne, has seen little variation in rates for business and industrial special risks, with most insurers happy to “roll over” policies based on last year’s price, terms and conditions.

But he has seen motor fleet rates fall, and says this is unexpected given higher domestic rates. The decreases don’t seem to be based on claims and Mr Ross believes the rate response is more about insurers competing to increase their market share.

MGA MD Allan Amber told insuranceNEWS.com.au rates have been stable for the past six months, although there have been some rises in certain industry areas.

“In some selected classes we have seen some movement in rates of between 5 to 7%.”

The lack of movement suggests insurers are wasting an opportunity to raise prices at a time when consumers have been primed to expect them after six months of exposure to disasters and warnings about the costs of recovery and higher premiums.

Midland Insurance Brokers MD Terry Lane says clients have been expecting increases, “but it looks like the insurers haven’t taken advantage of that. They’re still locked into a very competitive mindset.

“Clients haven’t had to send us back out to find lower rates or better terms. There hasn’t been a need because the rates on offer are no change or a rise so small it doesn’t matter,” notes another broker.

JLT Australia CEO Leo Demer says the property market was harder than in recent years at renewal, but liability and motor fleet were flat.

He describes the renewals period as “reasonably quiet” with not much business changing hands, and says clients were realistic.

“That’s why there probably wasn’t that much business floating around. All underwriters were pretty much in the same boat”, so clients knew there wasn’t a better deal to be had elsewhere.”

Clients might be smiling, but the outcome is unlikely to boost the stocks of the listed insurers, as the analysts who follow them are watching to see how much market leaders such as IAG, Suncorp and QBE can pass on higher costs of disasters to policyholders and will be adjusting their profit models and recommendations to clients accordingly.

Brokers say insurers have been recouping some costs and de-risking by looking more closely at their books, and raising rates and deductibles for clients who have made a claim. 

Mr Peirano says rural clients with an old Queenslander-style home are seeing the premium on the house double in some cases, because one insurer has removed caps on annual increases and the premiums are catching up to the market.

Several brokers say rural properties are copping increases, with a Victorian broker saying the average price rise is 18%.

SA-based Allan Amber says food and rural have been the two industries facing higher increases, and conditions on policies in these classes have also been strengthened.

“Insurers are reviewing some of the endorsements on most policies,” he said.

“Rural insurers have been grappling with their books for some time now and that has resulted in changes to conditions.”

Perth-based Executive Director of Leed Risk Services Con Manetas says insurers are trying for 10% increases in SME rates and are being tougher in negotiations. In the mid-corporate market, insurers are getting a 5% increase at most, and often no increase.

He says business clients expect increases because of all the commentary about the cost of reinsurance and catastrophes, but he has found this is not the case in personal lines, where people in the slow lane of the two-speed economy are trying to save money.

And personal lines is one area where rates are going up, although brokers say if premiums increase too much there is enough competition for them to move clients elsewhere. Some have taken clients from QBE and CGU because of this.

A Victorian broker says domestic insurance is difficult “because no one’s maintaining consistent rates. They’re all over the place. We’ve seen rises ranging from 5% to 15%. Everyone has a different reason, which once you look at it is no reason.”

Affinity’s Robert Ross has seen increases of between 15-40% market wide from all insurers in home, contents and motor, but says there has been some room for negotiation. 

Mr Demer says underwriters have acted with “great credit”, taking the rises where they needed them but showing restraint when they could have gone much further.

He says some insurers have tried to take the heat out of increases in property by offering discounts on liability.

Although the new financial year has opened with a soft market, not everyone believes it will continue.

Terry Lane says renewals went very well for Midland.

“We didn’t lose any clients, and everyone is satisfied with what we’ve managed. There have been slight increases across the board if they’re justified, but they’re only a few points.”

But he expects to see more significant rises coming through in the next six to nine months.

Leo Demer says insurers that renewed their reinsurance at July 1 would have experienced rises and those that renew in December will be expecting them and will have factored in the rises they need in the primary accounts. He has “no feeling that rates are going to keep going up and up and up” for the rest of the year.

A Melbourne-based SME broker says these are still early days.

“I expect to see commercial premiums rising over the next year. At present the emphasis is still on market share. That can’t last much longer, especially with reinsurance rates rising.”

Robert Ross says right now there remains “too much competition and capacity” in the market, but he sees movement over the next quarter. “I think there will definitely be changes.”