Ahead of renewal season, we produced our People Insurance Outperformance Report to guide organisations through some of the key considerations during renewals. We also shared trends and rate predictions across Australia.
Now the renewal period has passed, we are reflecting with our clients on how our predictions stacked up, the lessons learnt from this year, and actions that can be taken to ensure a smooth renewal process for next year.
So, what happened in the privately underwritten jurisdictions (Western Australia, ACT, Northern Territory, and Tasmania)?
Lockton anticipated insurers would be looking at rate increases anywhere between 3-5% across their portfolio for the 2022-23 period.
Overall, based on our June 30 placements, we estimate that insurers were seeking a rate increase between 2%-4% in Western Australia, and 4-6% across Northern Territory, ACT and Tasmania.
The following are some of the factors that influenced the rates:
Western Australia –
In April this year, WorkCover WA announced an average premium rate increase of 6.9% for the scheme.
While the smaller policies tended to mostly follow the rate movement of their relevant industries, this had a smaller impact for large employers.
Large employers continued to be mostly rated on their own experience, which is a combination of their claims performance and size (wages).
ACT, Tasmania and the Northern Territory –
In respect to the ACT, Tasmania and Northern Territory, insurer appetite tended to be less prominent in these jurisdictions. We observed a significant number of smaller employers have had a sizeable large loss or losses in the last 12 months which has resulted in large premium rate increases. However, due to the small payroll of these employers, the premium impact has been minimal.
The insurers will wear the majority of the losses in these cases as they will never collect a sufficient amount of premium (at a policy level) to cover the large loss or losses.
With another year down, what did we learn and what actions are Lockton recommending for next time round?
1. Timing is everything –
Lockton clients who completed their renewal questionnaires with quality responses and returned these on time achieved better renewal outcomes.
This provided the insurers with sufficient time to have a better understanding of risk as well as obtain additional information from the client.
From a broking perspective, this also allowed a more robust negotiation process with the insurers. Action which organisations can take: it is common practice for a large workers’ compensation program to take 6-12 weeks to place. For one client, an early start led to a 23% lower premium.
2. Insurer appetite somewhat non-existent for labour hire –
Action which organisations can take: Mitigation strategies are needed. Lockton have specific strategies in place for future labour hire renewals in 2023.
3. Higher wages support better outcomes –
In positive news for employers, insurers, workers compensation schemes and the economy, we have seen the vast majority of Lockton clients experience wage growth when compared to last year’s wage estimates.
For employers, higher wages helped support a better renewal outcome from a premium rate perspective. From a worker’s compensation scheme perspective, higher than expected wages result in a larger premium pool which places less pressure on industry rate increases into the near future.
Action which organisations can take: Keep your insurance broker updated throughout the year on potential wage changes (+/-10%) as this will help with on-going negotiations with current and potential insurance partners.
DOWNLOAD and read Lockton’s 2022 Outperformance Report which benefited organisations this renewal. Let us know your feedback for the 2023 Lockton People Insurance Outperformance Report by reaching out to your Lockton representative or contact us here.