July 2022 Market Update – Claims
- Over $228M in claims currently managed by Bellrock NSW.
- An average of 24 claims settled on behalf of NSW clients per month.
- Over $26M in claims currently managed by Bellrock Qld.
- A total of $20.5M in claims settled across all insurance classes by Bellrock nationally over the past 12 months.
With specific regard to claims attributed to recent NSW and Qld flooding events, Bellrock has achieved claims settlements twice as fast as the industry average. See our recent article on this subject.
- As at 10 June 2022, 40% of all notified flood claims have been settled (in contrast to the industry standard of 20 per cent).
- Bellrock are managing insured losses on average of $487,300 in contrast to the industry average of $20,000.
Over the last 12 months (as at 12 May 2022), the Bellrock NSW Team has assisted and advocated for clients, resulting in settlements and payments totalling $11.2M, apportioned respectively across the following classes:
- Property – 48.4%
- Public Liability – 3.7%
- Professional Indemnity and Financial Lines – 40%
- Combined Motor – 2.7%
- Combined Travel – 0.3%
The Bellrock QLD Team has assisted and advocated for clients, resulting in additional settlements and payments totalling $2.4M, apportioned respectively across the following classes:
- Property – 31.4%
- Public Liability – 47.8%
- Combined Motor – 14%
- Combine Travel – 0.4%
In addition to the above Bellrock Queensland has advocated for clients, resulting in additional settlements and payments totalling $6.9m for open claims relating to the Rain-bomb event in Brisbane March 2022. Current reserves on open claims are approximately $25.9m up to 30 June 2022.
In terms of new notifications for the 2021/22 Financial Year period, we have received the following:
- Motor / Fleet – 18.8% (Down from 23%)
- Property / Construction – 25.2% (previously 25%)
- Public Liability – 12.9% (Down from 15%)
- Professional Indemnity and Financial Lines – 30.1% (Up from 23%)
- Strata – 5.9% (Down from 7%)
- Corporate Travel – 2.7%
- Marine – 1.6%
Trends in claims
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 to Cyber Liability Insurance here).
In our previous Market update dated June 2021, it was estimated that Australian businesses will have spent in excess of $7.5B on cyber security in 2021.
As at September 2021, the Australia Cyber Security Centre confirmed that it had received around 67,500 reports of cyber incidents in Australia for the previous financial year with losses totalling more than $33B to Australia businesses.
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, “The Building Practitioners Act – Implications for Construction Professionals and their insurers in an already hardening insurance market” additional challenges have also emerged in 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 to AFCA.
- Tax Audit investigations.
- Claims by regulatory groups.
- Claims within the construction industry in terms of developments and product selection and defects.
- D&O claims for alleged ASIC and US Regulatory breaches.
As traversed in our recent article, ASIC v RI Advice, financial services licensees should expect further action from ASIC where there are failings in risk management.
In our November 2021 article, “The increasing incidence of natural disaster & impacts of COVID-19 on recovery efforts”, we report there has also been a continuation in terms 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.
- 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 $294M has been paid out in damages to date. Over 33,000 claims with 88 per cent closed out to date and equating to an average payout of $9,000 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: To date a total of $760M has been paid out to date, with over 99,000 claim registered and 49 per cent closed to date. The average payout attributable to this loss is estimated to be just over $7,600 per claim. - February 2022: On Monday 28 February 2022, the Insurance Council of Australia declared an Insurance Catastrophe for Southeast Queensland and parts of NSW as a result of record breaking severe weather and flooding which has occurred since 21 February 2022, with a reported 23 deaths.
Impacts: A total of $4.8B in claims are estimated to date incorporating 216,465 claims with an average payout of nearly $20,000 with a current closure rate of 20 per cent, with almost $1B paid to date. This is the costliest flood in Australia’s history and fourth most costly disaster overall. The cost is almost double that of the 2011 Brisbane flood, which saw $2.3B in insured losses.
On 9 February 2022, legislation for the Northern Australia Reinsurance Pool scheme for cyclones and related flood damage was introduced into the House of Representatives and was passed through the Senate on 30 March 2022.
As detailed in our article of 3 May 2022, the reinsurance pool will be established by 1 July 2022 and will be backed by a $10B, annually reinstated, Commonwealth Guarantee, with over 880,000 small businesses, residential and strata insurance policies being eligible for this scheme.
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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