That the cost of living in Australia is rising is no secret, but increasing inflation is also having secondary impacts when it comes to commercial property insurance.

The cost of repairs and replacement is increasing due to the effects of inflation on building materials and labour, both of which are in short supply due to other market forces including the disruption to migration flows caused by COVID-19, and to supply chains due to both COVID-19 and the Russia-Ukraine war. The result is that many property sums insured are no longer reflective of their true reinstatement cost in today's market, putting businesses at risk of being underinsured.

In our Business Insurance & Risk Market Update H1 2023 report, we explore the key trends putting many businesses at risk and look at what other considerations regarding commercial property insurance can be made including:

  • property premiums are expected to continue to harden due to inflation and ongoing supply and demand pressures
  • inflation and other pressures means property sums insured are no longer reflective of true reinstatement costs, putting businesses at risk of being underinsured
  • detailed valuations by quantity surveyors are recommended to ensure sums insured are adequate, despite the potential for premium uplift
  • with temptations to take cash settlements for property claims businesses should be aware that these may not meet replacement costs.

Other topics in the report include:

  • placement — premium increases have levelled out but risk selection is still critical
  • claims — a maze of obstacles and contradictions surround the claims environment
  • professional and financial lines — rate rises are stabilising but risks remain high
  • cyber — underwriters are focusing on risk management at executive level
  • workplace risks — psychological risks in the workplace are the new business focus
  • construction — liability concerns remain key for the construction sector.

Looking for business risk and insurance advice?

During this time of change you can turn to our Gallagher experts for advice and guidance. We are here for you and will do everything we can to help you face the future with confidence.

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