Why does Broome pay higher premiums?
Written on the 3 October 2017 by Clare Smith
This is a question that I have been asked many times since moving to Broome. There are a few reasons why the North West is paying more, the main being the inclement weather and lack of Insurers willing to compete in this space.
Currently we have three main Insurers that will look at a property risk above the 26th parallel and those Insurers base their rating structure on the following factors:
Type of risk (occupation/business)
What you may not be aware of, is that the Insurers have a backing agent called a Reinsurer. Essentially, the Reinsurer is the insurance companies "insurance company".
The Reinsurer provides capital to the Insurer and once they have exceeded the claims costs that they have agreed on with the Reinsurer the Reinsurer will pay the Insurer.
The Reinsurer does not see Australia in states or areas but as "below and above the 26th parallel". This means that any claims in the North West think of the recent claims in Queensland and the East Coast from cyclone Debbie that are likely to cost $2b affect all towns above the 26th parallel.
The Reinsurer provides a cost to the insurance company who in turn passes on some of this cost to the Insured.
Along with the ongoing losses incurred by the Insurer this means that rates across the board are increasing (not just in the North West) but as we have incurred higher losses to the Insurers the premiums for the North West have increased comparatively more than the rest of Australia.
We have noted that this year the renewal cycle has started to turn and all property risks have been increasing and this is a trend that is likely to continue until the Insurers have been able to recover some of their losses and return their portfolios back to a profitable level.
Part of my role as a broker and client advocate is ensuring that my clients are not disadvantaged. We are continually in negotiations with Insurers to push them to understand the specific risks in Broome and surrounds and to determine a rating structure that is aligned with the actual risks that these areas face.
Contact Clare at Phoenix Insurance for more information:
Clare Smith | Manager / Senior Broker | Phoenix Insurance Brokers
08 9193 6814 | ( 0476 766 100 |7 08 9192 2088 | www.phoenixins.com.au
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