Rising Cost of Claims

Rising cost of claims

The amount of paid out to customers who make claims is the biggest single cost of any insurance company.Claims levels across Australia have reached unprecedented levels over the past year as a result of a spate of natural disasters.
For example, CGU received 25,000 extra claims over the 2010/2011 summer period alone as result of events including cyclones and floods across Queensland, New South Wales and Victoria.

In conjunction with the rising number of claims, the actual costs of meeting claims has also been increasing because the materials of rebuilding and repairs have become more expensive, and the cost of labour and tradespeople has risen sharply due to the high demand for their services.
Increasing construction costs

From builders to carpenters, and electricians to painters, tradespeople in some areas of Australia have been inundated with work arising from insurance claims. Average payment rates have risen accordingly, and there is every likelihood they will continue to rise as labour demand exceeds supply.
And, of course, many of us also own more expensive items these days, and an increase premium will rise to reflect the increase in value of the assets being insured and their replacement value, regardless of any additional external factors.

Together, these factors have resulted in a sharp rise in the cost of paying insurance claims in all locations, not just in areas that were specifically impacted by the weather
Source: CGU