Question: How much do historical claims impact the upcoming year’s strata insurance premium? Is there a ratio?
Answer: Claims history does impact the insurance premium.
Claims history is a major rating factor considered by insurers and therefore it does impact the insurance premium. Guidelines around claims history will differ from insurer to insurer.
In our discussions with insurers, we are advised they are targeting clients with “running losses” for everyday claims such as water damage, glass & impact damage claims of less than 30% of the insurers base premium (excluding GST, Stamp Duty, Fees).
In addition to paying for claims associated with “running losses” the remaining premium is used by the insurer to cover operating costs (such as wages, rent etc) and re-insurance which insurers purchase on global insurance markets to cover low frequency/high cost claims that might happen say every 25, 50 or 100 years including one off large losses (claims over say $500,000) & catastrophe events (such as storm’s, earthquake, tsunami etc). When “running losses” exceed 30%, due to operating & re-insurance costs the insurer must provision for, a policy starts to run at a loss for the insurer.
Insurers are also looking at the type of claim – for example, water damage claims are less favourable for some insurers. A series of water damage claims can be a lead indicator that pipes, membranes, roofs and other water apparatus are starting to fail due to either coming to the end of their use life or they were not installed correctly when the property was built.
To avoid your claims history impacting your insurance premiums, it is recommended that regular preventative maintenance is conducted.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.