The current soft market is brimming with opportunities for brokers and their clients, who are leveraging strong negotiating power to secure lower rates and broader coverage. The arrival of global giants like Markel and Everest, along with a steady influx of new underwriting agencies, has intensified this trend across many insurance lines. But it’s not all smooth sailing – some risks remain stubbornly resistant to softening. These market “hot spots” can emerge even within generally soft lines, or persist in areas that have always been tough to place.
Joe Hershewe (pictured above) said there are still many areas that brokers are grappling with as hard to place risks.
“I would say there are some hot pockets in the market,” said Hershewe, who is practice leader for claims at Bellrock. The workers' compensation space is one of those pockets, particularly where labour hire agencies are involved.
“There's personal injury, particularly worker to worker claims – that's a hot issue,” he said.
Exact claims figures are hard to come by but according to Icare, the NSW agency, total workers compensation claim costs rose from $4.4 billion in 2022-23 to $5.3 billion in 2023-24.
In states like WA and Tasmania where private insurers participate in workers compensation schemes, several insurers have tightened their underwriting criteria or withdrawn from writing new business for high-risk classes. Especially for industries that suffer from high claims frequency and severity, for example in construction and healthcare.
Industry figures show that in NSW, workers compensation rates have continued to rise by about 8% year on year. There are other areas of the insurance market that show few signs of softening where brokers will need to manage risk with care.
Labour hire and subcontracting: Businesses that use labour hire or subcontractors, especially in construction, face higher premiums due to the complexity of “worker to worker” claims and increased injury frequency.
Facilities such as aged care homes and disability services face high premiums due to the frequency and severity of injury claims (including manual handling injuries and psychological claims).
Businesses in waste collection, recycling and landfill operations are high risk due to hazardous work environments and machinery-related injuries.
Venues such as nightclubs, pubs and hotels are still struggling to find affordable public liability and workers compensation insurance due to the risk of violence, slips, trips and falls.
Operators of amusement parks, adventure sports (e.g., rock climbing, ziplining), and water parks face high premiums or may be unable to obtain cover at all due to the potential for serious injury.
Properties in areas with high exposure to bushfire or flood risk are seeing persistently high property insurance premiums, with some insurers declining to offer cover.
Building certifiers, engineers, and some medical professionals have seen premiums rise or cover become unavailable due to historical claims and regulatory scrutiny.
Hershewe said the pricing in these higher risk areas of the insurance market is not going to drop like it has for other classes of business.
“Cat exposed property risks and high hazard stuff certainly isn’t plummeting,” he said. “There can be appetite, but it's not as broad.”
However, Hershewe said brokers might be able to get 5% discounts on some tougher risks within a sector where, generally speaking, rates might be dropping by about 15%.
Where clients need help with affordability, there are ways brokers can help.
“On the policy, underwriters might apply certain exclusions and limit how much they are willing to pay out,” Hershewe said.
Hershewe gave the example of a policy that might have a $10 million limit but in specific circumstances may only pay out $500,000. This can bring the premium down.
“They might apply higher deductibles,” he said. “So there are little levers that they can pull to manage the pricing.”
This can be helpful to customers in the shorter term, he said, but he warned that brokers need to be wary of this approach.
“What I would be concerned about is whether the customer is getting the cover they need,” Hershewe said. “So there are ways to cut costs down but it can create other issues.”
Where are there “hot pockets” of risk in Australia’s insurance market that are resisting softening? Please tell us below.
