EBM Insights podcast series is a deep dive into current issues surrounding insurance and risk management in today’s ever-changing world.
Introduction:
In this podcast we talk with Richard Jane, Executive Account Manager at EBM Insurance & Risk about some of the latest information available in the May 2025 issue of EBM’s Insurance Market Summary report.
A transcript of this podcast is below. The complete EBM Insights podcast series is available here.
Disclaimer
In this podcast, we have provided general advice only and not personal advice. In giving this advice, we have not considered your personal circumstances.
00:00:17 Speaker 1 – Sandy Cattley (Senior Marketing Specialist, EBM Insurance & Risk)
Welcome everyone to this podcast. I’m Sandy Cattley from EBM Insurance & Risk.
EBM ‘s latest Insurance Market Summary report is now available and provides an in-depth look at the current position of the Australian insurance market.
Today I’m joined by Richard Jane, an Executive Account Manager from our Sydney office as he provides some commentary on some of the key themes in this issue.
Welcome Richard.
00:01:45 Speaker 2 – Richard Jane (Executive Account Manager, EBM Insurance & Risk)
Hello everybody. Hi Sandy.
00:00:44 Speaker 1 – Sandy Cattley
Thanks for joining. I thought we’d start with an overview of the current insurance market in Australia. Over recent years we’ve been in what is known as a hard market as opposed to a soft market. In recent times we are starting to see this shifting. Can you explain the difference between a hard and soft market?
00:01:04 Speaker 2 – Richard Jane
Of course. So, essentially the market started hardening way back in 2012 when we were at the bottom of the soft market, and it’s hardened significantly since then and we seem to have come to a plateau or a point where the markets starting to soften a little bit in certain areas. So essentially when you’re in a soft market there’s a lot of competition between insurers more from the point of view of them trying to maintain their books of business so it is to the benefit of clients in terms of rates and premiums terms and conditions that might be able to be gleaned from those underwriters in an effort to keep that piece of business or risk that’s on their books.
In a hard market, it’s usually driven by claims costs, reinsurance costs, and the ability of insurers to deliver returns to their shareholders, as such, which is one of the factors that comes into play as well. When interest rates are low and other earnings are low, insurers get to a point where they have to start increasing the rates to cover their claims costs and their obligations to their shareholders so rates will start to increase as well as to meet rising reinsurance costs. When that happens, you’ll find that insurers will start reducing the capacity that they’re willing to put out on certain risks, they will look to restrict cover in certain areas as well or will walk away from certain types of business that they see as being adverse to the way their book business is currently running. In some situations, you may get insurers, as I said, withdrawing from the market altogether in certain areas and that can work to other insurers benefit because they know that there is a shortage of capacity and it allows them to drive up prices because people need to get the insurance covers that they need. At this point in time, I think with interest rates being so high, insurers are sort of returning to a certain level of profitability and when they get to that level, you’ll see new capacity into the market as well and then so begins the transition into a softening market.
00:03:24 Speaker 1 – Sandy Cattley
And where is the Australian market sitting at now?
00:03:28 Speaker 2 – Richard Jane
The market itself, over the last twelve to eighteen months, has plateaued. I think I mentioned that before it’s plateaued, and in some areas, we’re starting to see reductions in premium rate or premium costs which is of benefit clients obviously but again that’s due to insurers ability to deliver returns to their shareholders then at the same time improved portfolio performance which allows them to, in certain areas, provide that rate relief which is a good thing for the clients as well because they have been doing it hard for a long time. Year on year it’s like here’s another increase, 20%, 30%, whatever it may be depending on the nature of the risk. it is softening. I don’t expect it to go to the levels that it was way back in 2012. I think it would be sort of somewhere in between there. There is uncertainty around the world regardless and there seems to be significant events keep occurring globally and locally, but this seems to be being absorbed by the insurers because they’ve got the rates and the premiums that they’re seeking at a level that allows them to maintain it, as opposed to lift it, year on year.
00:05:09 Speaker 1 – Sandy Cattley
So, for the client it might be a good time to review their risks and insurance options. What are some options to think about in a soft market?
00:05:16 Speaker 2 – Richard Jane
I think when you’re going into a softening market it’s always good to test existing placements that you might have with an insurer and I think over the hardening of the market a lot of clients had to adopt better strategies around their risk management, which makes risks more presentable to the insurers which ultimately results in better outcomes or cost outcomes. In saying that, it’s always good to test a program in a hard market every two to three years just to see what’s out there, and particularly with the market softening existing insurers are aware of it and other insurers are keen to look at items in your business as well or offer more competitive terms from the deductible point of view, or add additional covers in that were previously not available as sweeteners to pick up that piece of business which is all ultimately of benefit to the end user, our clients.
00:06:32 Speaker 1 – Sandy Cattley
Let’s move into property. It‘s reported that there is an increase in competition in this area. Has this contributed to a further softening of the property market?
00:06:45 Speaker 2 – Richard Jane
There has been new capacity come into the Australian market because they [insurers] see it as an opportunity to grow their individual books of business. So, as a result, insurers are looking to retain what they have on their books and as a result that ends up having the insurers review rating, reduce their costs, and offer additional benefits which I think I touched on earlier. With that increased competition, if it is a well-managed risk, you will see premium reductions of up to 15% instead of what we were seeing in previous years when it was a premium increase of up to 15%. If it’s a particularly high hazard risk, there are still some new entrants into that particular sector as well.
You will see some decreases in premium costs. I would expect to see some decreases in premium costs, but they won’t be in your magnitude of 10% to 15%, it would be more like 5% to 10% potentially and that’s where they’re well managed in terms of their risk profile.
I think despite what we’ve seen in recent times with the flooding, the recent [Tropical] Cyclone Alfred I think the property insurance market sort of dodged a bullet there, to some degree based on the way that that storm behaved. But it still highlights the intensity of storms and all the resilience and the ability of the communities that are being affected by it to prepare for it, and that’s as a result of the previous events that we’ve had. Such as the extreme flooding in the northern rivers a few years back, and in north Queensland and elsewhere as well. I think in the next few years, we are a sunburnt country, it’s flooding at the moment. It will be burning again in a few years’ time.
But you know that’s the cycle and you know it’s similar to what we’ve seen in Europe, and America in recent times, as well it’s a similar cycle but I think with what’s going on in the property insurance market with reinsurers and the like as well everything’s at a level where it’s sustainable which is the important thing, and as soon as it starts to become unsustainable, we’ll start seeing those rates rise again but I wouldn’t anticipate seeing that for potentially the next five years but don’t hold me to that though.
00:09:20 Speaker 1 – Sandy Cattley
No, we won’t!
So, let’s now move on to cyber.
A cybercrime is reported in Australia every six minutes and among businesses the top three reported cybercrimes are email compromise, online banking fraud, and business email compromise fraud. So, what’s happening here in the insurance space?
00:09:46 Speaker 2 – Richard Jane
In the world of cyber insurance and cyber risk there are a lot of insurers that have come into the marketplace in recent times and that’s having the effect of being able to get existing insurers or more established insurers to review their rating and bring their pricing down. Alot of them are doing that regardless anyway. For a while there when cyber insurance was sort of in its infancy there was a lack of data available to appropriately rate the programs and it’s not like a traditional risk transfer type of insurance, it’s an insurance that sits alongside the risk management policies, procedures and processes that a business has in place.
I think over time cyber insurance will become such that it is similar to purchasing property or general liability cover in the future based on the level of activity that’s going on out there and yes there is email compromise as you said, the business email compromise and online banking fraud are sort of major areas of concern, but ransomware itself is on the rise as well.
I saw an interesting statistic the other day which I will read. It is expected that in 2031, cybercrime will cost a trillion US dollars a month.
It’s a trillion per year at the moment.
00:11:29 Speaker 1 – Sandy Cattley
OK that’s not so far away!
00:11:30 Speaker 2 – Richard Jane
Interestingly though, over the last twelve months there has been a sort of drop in the overall cost of an insurance claim which is seems to go fly in the face of what’s actually happening in terms of the increased activity. I think that’s the result of more and more businesses being prepared or taking their cyber security much more seriously. Multi factor authentication and things like that are sort of expected as standard these days and most businesses will have that, and they will also because everyone’s working remotely or some semblance of a remote working environment. For a little while there during COVID times, the attack surfaces were a lot broader because businesses had to pivot so quickly, and the cyber security was such that it took a little while for it to catch up. But now since then and since the prevalence of attacks has risen, a lot of businesses have caught up and are prepared for it and have, as I said, the processes and procedures in place to the deal with a cyber event and if they have a cyber policy, the insurer will work with the affected clients on a forensic basis and go through the system to see whether the incident has occurred and we’ll also work with clients to prepare their response to the OAIC [Office of the Australian Information Commissioner] if needed. Or help them address any issues or concerns raised by the affected parties, where data has gone missing. So, I think that the crisis event response cost element of the cyber policy is very important as well as the social engineering aspect but yes, it is a growth industry.
00:14:07 Speaker 1 – Sandy Cattley
Thanks. That’s a great summary for us on cyber thank you.
EBM ‘s latest Insurance Market Summary is available on ebm.com.au. It contains information on what we’ve discussed in this podcast along with updates on financial and professional lines, D & O, marine and cargo, transport and logistics, construction, mining, and agriculture.
You can easily download the full version today and there’s also a link to it in this transcript.
So, I just want to thank Richard again for a great podcast and for joining me today.
Thanks Richard.
00:14:43 Speaker 2 – Richard Jane
Thanks very much, Sandy. It’s been a pleasure. I’ll talk to you again soon.
00:14:48 Speaker 1 – Sandy Cattley
Thank you.
[end]
