Liquor retailers operate in a complex environment. Evolving regulations; societal complexities; digitisation, and of course, a global pandemic, have meant retailers need to carefully consider the steps they take in the running of their business. The recent increases to insurance premiums faced by liquor retailers have undoubtedly added pressures to your bottom line. While receiving a higher-than-expected insurance bill can be cause for stress, understanding how premiums are calculated, and why they increase can help to make sense of these increases.

Your premium is calculatred to reflect the risk and likelihood of a claim on the policy, and this is determined by several factors. Public Liability and Property/Business Insurance are generally the most common policies considered by liquor retailers.

A Public Liability insurance premium will mostly depend the size of your store and your location. A Property Insurance premium however will take into account additional factors such as the amount of stock you hold; your revenue, and fire protection and security measures at your site. You may, however, see your premium change even if none of these factors have changed for your business. This is where the impact of external events comes into play…

Insurance premiums are not only a reflection of your own business, but also of what is happening in the broader insurance market. When there is an upward trend in claim volumes and/or costs, then insurance premiums are generally driven up across the market. Australia’s climate has been fluctuating with respect to natural disasters – just cast your mind back to pre-Covid-19, when news headlines were dominated by severe bushfires & extreme storms. The frequency and severity of natural disasters in recent years have meant almost all businesses & individuals have felt the effects in their insurance premiums, particularly Property policies.

So what about Public Liability Insurance premiums? PL premiums are no exception when it comes to being impacted by market events. According to Aon’s Risk and General Liability Insurance Market Insights, Q2 2020, rising costs of insurance claims due to increasing litigation; broader definitions of liability and more 'plaintiff-friendly' legal decisions have all played a role in Public Liability premiums also seeing substantial increases in recent months.

The combined effect of natural disasters and increasing litigation have led to what is known as a ‘hard market’ in insurance. Put simply, high claims costs and volumes have led to high premiums. In a hard insurance market, your insurance broker can play a role in the type of cover and prices across the market for your business. By choosing a broker who has spent time understanding your business, industry and the unique risks liquor retailers face, you can be sure you’re made a smart decision for your business.