There are few NFP sectors left untouched from the events of 2020. Given not-for-profit organisations were already facing challenges such as declining revenue and stricter access to government funding, the recent increases in insurance premiums was a less than welcome change. You may be thinking that your organisation hasn’t made a claim, so why has your premium gone up? Unfortunately, when it comes to the cost of insurance, there is much more considered than just your own claims history. Severe weather events such as storms, bushfires and an overall increasingly litigious society has meant some organisations have seen premium increases of 25% over the past year. Below we explain what has caused these increases, and what it means for the not-for-profit sector.
How are insurance premiums calculated?
Your premium is designed to reflect the risk and likelihood of you making a claim, which is determined by a number of factors. Although these factors will greatly depend on the type of policy you’re taking out, there are some common factors that are considered for most types of insurance policies. Some of these include your revenue, the size and nature of your organisation, and activities For example, if your organisation is conducting childcare activities, then you may find your premium is very different than an organisation that of a seniors or social club.
However you may see your premium change even if none of the above factors have changed for your organisation. This is where the impact of external events come in. Events such as severe storms, bushfires, and an overall increasingly litigious society has meant that claims volumes and costs overall have increased, which inevitably leads to the cost of insurance being driven up.
Why have NFP’s seen premium increases?
Australia’s climate has never been known to be a mild one, but the past few summers indicate that the effects of climate change have led to even more intense conditions – the same land can be incinerated by bushfires, and inundated with flooding rains within a window of a month. Such weather extremities, when combined with increasing litigation claims, has led to insurance premiums being driven up to the point of some organisations going without insurance completely. This can lead to NFP’s not being able to afford the required insurances and having to cease their activities.
In the not-for-profit sector, increasing claims in Protector/Association Liability (cover for Directors and Officers including Professional Indemnity and Management Liability), has put further pressures on insurer’s pricing and claims costs. This has not only led to increasing insurance premiums, but also certain covers being withdrawn from the market completely.
A hard market…
The above factors have all led to what is known as a ‘hard market’ in the insurance industry, or, put simply, high claims volumes leading to high premiums. In a hardened insurance market, it is especially important for NFP’s to review their cover and work with their broker – while it may be tempting to reduce your cover, it’s also important to keep in mind that during economically challenging times, risk of negligence claims remains ever present. It is important for NFP’s to select a broker who has taken the time to understand the sector to offer the most appropriate cover, and one that is willing to be your advocate should your organisation need to make a claim.
Aon has specialised NFP team working specifically in the sector for over 30 years. We arrange all aspects of NFP insurances including Protector/Association Liability, being Directors and Officers and Professional Indemnity; as well as Public Liability; Property; Business Interruption; Motor; Volunteers Personal Accident and more.
Call 1800 123 266 to chat the team today.
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Aon has taken care in the production of this document and the information contained in it has been obtained from sources that Aon believes to be reliable. Aon does not make any representation as to the accuracy of the information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it. The recipient of this document is responsible for their use of it.