Business insurance premiums have been very steady over the last couple of years, and many of our clients have enjoyed no increases over that time.

But unfortunately for some clients, that is starting to change, with business insurance rates increasing across the industry.

We get clients asking us why their premium has increased when they haven’t claimed and their business hasn’t changed, and that’s a completely fair question!  So we’ve put together some information to help answer that question.

The article assumes we’re not talking about premium increases due to changes in your business. That’s a completely separate issue and we recommend discussing such changes with your account manager.

Have rates really increased?

For plenty of our clients the answer will be no, and for some the answer will be yes depending on a range of factors.

It’s also important to look at the long-term trend and where rates have come from, especially rates for trade insurance.

Back in 2010 when Trade Risk launched, the cost of $5 million public liability for a Qld electrical contractor was $765.  That was the best price we could source, and we wrote a lot of business at this level.

Today, that same quote would be just $509 via our website!  So even if we do see some 5% increases over the coming years, the insurance is still far cheaper than what it was nine years ago.

One of the main reasons for this is that business insurance became incredibly competitive over the last 5-10 years, which lead to many insurers dropping rates and then not increasing them each year.

But that can’t last forever, which is why some clients are starting to see price increases, and will probably continue to over the coming years.

But we’re here to help!

As your broker part of our job is to look out for you at renewal time.  So if your insurer does lump you with a big price increase, we’ll look at which other insurers might be able to offer a better deal.

If we can find you a better deal on your trade insurance, and the new policy is still going to be appropriate for you, we can switch you over.

In some cases we can also ask your current insurer to review the increase.  Sometimes they can help (especially if we have a lower quote from elsewhere) and sometimes they can’t, but we’ll always have a go for you.

Ups and downs

Insurance costs can be very cyclical.  5-10 years ago rates all came down as the insurers competed with each other for market share, especially for the tradie insurance market.

With hindsight, we can probably say they all pushed down to low, and therefore they’ll need to push them back up in coming years to ensure the overall viability of the insurers.

Chances are they’ll end up pushing too high, and at some point they’ll realise they can start discounting again to win more market share!

In the industry the cycles are referred to as a ‘softening market’ and a ‘hardening market’.  In the softening market rates are going down, and in the hardening market rates are going up.

Why do rates go up?

Outside of the cyclical ups and downs there are plenty of reasons why rates might increase from one year to the next.  We’ll kick of with some of the more basic reasons to start with.

Increased cost of doing business

We all know that the cost of goods and labour goes up all the time.  That’s inflation.

The cost of securing good staff goes up, office rent goes up each year, electricity prices have increased and the cost of pretty much everything else that goes into running a business increases.

Not only does that increase the cost of running an insurance business, but it also increases the cost of claims, as the claims cost more to settle.

Just like your business or ours, we’re all here to make profit, and insurance companies are no different.  So when all of their expenses go up, they need to take action to cover that.

Option one is to increase their income, meaning higher premiums, or option two would be to reduce their expenses by paying fewer claims, but of course no decent insurance company can do that.

So it’s option one – increasing premiums.

Over the last five years or so the insurance market has been ultra-competitive, so insurers have tried not to increase premiums in order to win more business.  That’s great in the short-term, but it doesn’t take an accountant to work out that couldn’t last.

So that’s the most basic reason for cost increases, good old inflation.

Increased claims for a specific trade

This is where we start to move away from looking at the overall business insurance industry and focus on an individual trade.

If an insurance company finds they are experiencing a high level of claims for a certain industry or a certain trade, they will re-price the premiums for that trade to ensure they’re not making a loss.

Sometimes this only affects a single insurer, and sometimes it can affect the entire insurance industry depending on how bad the claims are.


A recent example is that of plumbers.  Going back 5-10 years we found that premium rates for plumbers weren’t hugely different to other comparable trades such as electricians.

But over the last few years the industry has experienced much bigger losses from plumbers, and in particular for commercial plumbers and those working in multi-storey properties.

From what we’ve been told by the insurers, much of this relates to water damage claims, especially within a multi-storey building where the damage can impact upon multiple floors before it’s even noticed.

To cover this big increase in claims the insurers have responded by increasing rates.  Plumbers who’ve never made a claim could be rightly annoyed that their premiums are increasing when they’ve never made a claim, but that’s the nature of insurance.

One well-known insurer has responded not by simply increasing rates, but instead excluding work on buildings that are three levels or higher.  This is great for residential plumbers working on one or two level homes, as it means they can avoid the big price increases thanks to their lower risk.

But I never claim!

We’ll finish off with the classic line that we sometimes hear.  It’s from tradies who question why their premium has increased when they’re never made a claim.

Some push it further saying that their premium should decrease because they haven’t claimed.

That’s not an unreasonable thing to say, but business insurance just cannot work that way.

We had a flooring contractor who was a client of Trade Risk while back.  He was with us for a few years and his premium in the latest year was $498.

He fitted the mould of someone who was very low risk and never claimed, then one day…  Boom!  A $600k claim for personal injury to a third party, all due to a small piece of aluminium trim used on a vinyl floor.

After the lawyers battled it out our client was ‘only’ responsible for $95k of the final claim of $325k, and the insurance company paid out that full amount as well as legal fees on top.

At $498 a year in premiums, it would take the insurer another 190 years’ worth of premiums to cover the claim!  Add in the legal fees and it would likely be over 200 years.

That’s not completely accurate as obviously the premiums would increase over that time, but it would certainly never be recovered in the client’s lifetime.

So you might never have claimed, and you might think you are low risk, but it takes one seemingly minor incident to suddenly wipe out a lifetime of insurance premiums.

And that’s the way that the entire insurance industry has worked for hundreds of years.  Some clients will never claim and make the insurance company some money, whilst others will claim and result in losses.  Overall the insurer’s aim is to break even, plus of course some profit for the shareholders.

Did we say we’re here to help?

We did, but we want to say it again.  We are here to help!  We can’t guarantee that we’ll get you a lower premium each year, or even that your premium won’t increase, but we’ll do our best.

Just like the cost of building materials and labour increases with inflation, so does the cost of business insurance.  But no matter what, we’ll always fight for the best deal for you.

How can business insurance premiums increase?