According to Gallagher Bassett's annual industry survey, premium affordability has emerged as the foremost challenge for insurers, with 22% of respondents ranking it as their top concern. This marks a significant change from previous years, where other issues took precedence. The survey highlights that 70% of insurers reported higher costs per claim and an increase in claim frequency, prompting half of the respondents to consider raising premiums. Sustaining growth under these conditions necessitates proactive cost management strategies, including adjustments to pricing, claims forecasting, and triage processes.
Climate-related losses have been a major contributor to the rising claims costs. Data from the Insurance Council of Australia indicates that insured catastrophe losses amounted to approximately $2.61 billion in 2023-24 and $1.97 billion in 2024-25. Notably, events like Ex-Tropical Cyclone Alfred in March 2025 resulted in over $1.5 billion in claims. These substantial losses have placed sustained pressure on premiums, increasing the risk of customers dropping coverage due to affordability concerns.
In response to these challenges, insurers are implementing several strategies to manage costs and maintain premium affordability. These include enhancing risk assessments, adjusting coverage limits and terms, and leveraging technology to improve operational efficiency. Additionally, there is a concerted effort to address the impact of climate change on insurance by investing in more granular climate data and modelling to better price risk and manage exposure in high-risk zones.
For home services businesses, these developments underscore the importance of staying informed about changes in the insurance market. Business owners should proactively engage with their insurers to understand how these industry shifts may affect their coverage and premiums. Exploring options such as bundling policies, implementing risk mitigation measures, and regularly reviewing coverage needs can help manage costs and ensure adequate protection.
As the insurance industry continues to navigate these complex challenges, the focus on premium affordability remains paramount. By adopting proactive strategies and fostering open communication with policyholders, insurers aim to balance the need for financial sustainability with the provision of accessible and comprehensive coverage.
