2022 Market Update – Claims
In reflection of Bellrock’s expertise in providing claims services, on 3 December 2021 we were granted a variation to our Australian Financial Services License to ‘handle and settle claims’. The application was made in response to the regulatory changes resulting from the Hayne Royal Commission which have led to an amendment of chapter 7 of the Corporations Act to include insurance claims handling as a financial service — “This successful authorization from ASIC is a significant milestone for Bellrock, and gives further certainty to clients regarding our strengths and capabilities across the claims advocacy services we provide.” Says Director of Claims, Mat Holland.
In respect of claims for the 2021 calendar year, the Bellrock team have assisted and advocated for clients, resulting in settlements and payments totalling $7.1m.
- Property – 23%.
- Public Liability – 6%
- Professional Indemnity and Financial Lines – 65%
- Motor / Fleet – 23%
- Business Pack – 6%
- Property / Construction – 19%
- Public Liability – 15%
- Professional Indemnity and Financial Lines – 23%
- Strata – 7%
In terms of claims activity over the past 12 months, there continues to be a significant increase and awareness in terms of Cyber Liability Insurance (see our guide here). In our market update back in June 2021, it was estimated that Australian businesses will have spent in excess of $7.5 billion on cyber security in 2021.
Another area where increased activity has been observed is Strata related claims. Aside from claims arising from some significant storm events throughout 2020/2021, we have also seen a notable increase in disputes and claims arising from renovations to Strata Buildings. See our recent article on this topic here .
Throughout Australia’s construction industry there continues to be increased scrutiny and claims activity. This has become even more challenging in what is a continuing “hard market” environment for construction professionals, in which premiums are increasing, limits are being reduced, rising excesses and the narrowing of cover generally.
As discussed in our article, here additional challenges have also been shifted onto the building industry and consequently onto the insurers of building professionals and practitioners following the introduction of the Design and Building Practitioners Act 2020 (NSW).
- EPL Unfair Dismissals
- Claims by AFCA
- Tax Audit investigations
- Claims by regulatory groups
- Claims within the Construction industry in terms of developments and product selection and defects.
As detailed in our recent article here, there has also been a continuation in terms of increased severity and frequency of major weather events, with the last 12 months seeing a continued onslaught of property claims arising from cyclone, flood, storm, hail and bushfire.
- February 2021: Bushfires broke out in Wooroloo on the outskirts of Perth which quickly spread to the whole semi-rural area with 86 homes destroyed and over 10,000 hectares burned. A coordinated clean up response by the State and Commonwealth government saw that affected property owners were treated equally regardless of insurance cover and savings from insurers could be passed on to policyholders to maximise funds for rebuilding.
Impacts: A total of $93 million in damages. 1,102 claims with an average of $84,000 paid out per claim.
- March 2021: Sustained heavy rainfall across most of the eastern seaboard saw rain and flood damage to NSW and SE Queensland. A critical shortage of builders and trades continues to pose challenges for insurers in repairing businesses and homes affected. This issue is further compounded by state border restrictions due to COVID-19 which have largely prevented the local tradespeople being supplemented with interstate workers.
Impacts: A total of $652 million in damages. 56,358 claims with an average of $12,000 paid out per claim.
- April 2021: Tropical Cyclone Seroja was officially named by the Indonesian Bureau of Meteorology on April 5, 2021 maing landfall in the mid -west region of Western Australia the following day. The category 3 storm caused huge disruption to mostly unprepared coastal towns with Kalbarri and Northampton the worst affected. COVID-19 was a key factor hampering recovery efforts with the strict border restrictions imposed by WA impacting insurers ability to deploy disaster specialists to affected sites.
Impacts: A total of $281 million in damages. 6,751 claims with an average of $42,000 paid out per claim.
- June 2021: A severe storm East of Melbourne caused moderate to severe flooding most apparent in Gipplsand and surrounds and the Yarra Ranges. Wind damage and power outages were substantial factors in the disaster with some residents without power until mid July. Once again limited access caused by COVID-19 delayed recovery efforts and the disaster also served to highlight the gap in support between government and insurers relating to fallen trees. Insurers only being liable for fallen trees which have caused property damage, with compromised trees that have not caused damage falling into a “gap” in insurance.
Impacts: A total of $230 million in damages. 26,578 claims with an average of $9,000 paid out per claim.
- October 2021: Severe storms ravaged the East coast of Australia affecting residents in QLD, NSW, Victoria and South Australia. Storm related damage, in large part due to hail, in parts of South Australia has been so extensive an insurance catastrophe has been declared. More than 12,000 claims have been received by insurers as at October 31 with more expected over the coming days. Motor vehicle claims represent two thirds of those lodged so far with crop losses in the Barossa Valley region also expected to be substantial.
Impacts:Total damages are as yet unknown as claims are still being submitted & assessed.
Regarding COVID-19 related issues, there remains a significant and wider impact on the insurance industry across all insurance products. Whilst most claims have focused on the hospitality and travel sectors, the most notable and well publicised relate to the two Business Interruption “test cases” which were both litigated in the High Court.
However, there continues to be wider implications such as potential claims against Directors & Officers and Company Liability in terms of responses to COVID-19, mismanagement of company finances, continuous disclosure, insolvency, unfair dismissal and claims brought by regulatory authorities by way of some examples.
In reality, the aftereffects of COVID-19 will likely continue for some time to come, impacting a broad spectrum of insurance products.
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