Professional indemnity (PI) and public and products liability premiums have increased sharply since 2015 as claims trends deteriorated, according to an annual Australian Prudential and Regulation Authority (APRA) report.

The APRA National Claims and Policies Database says PI gross written premiums (GWP) grew by 75%, made up of a 27% increase in average premiums and a 38% increase in risk counts.

Overall PI premium volumes grew modestly over the 2009-2016 period at an average increase of 3.2% per annum and then escalated from 2017-2020 at an average increase of 12% – rising from about $900 million to $1.4 billion.

APRA says PI affordability improved during the 2009-2015 period as premiums fell by an average 3.4% from $2900 to $2350.

“This indicates that the affordability of professional indemnity insurance was improving over this period,” APRA says.

But the trend reversed by 2021 as average premiums were higher at $3000, representing a 27% increase or an average 4% annual increase from 2015 to 2021.

APRA says by industry the insurance sector – particularly insurance brokers – and financial planners as well as building surveyors saw “significant” PI rises.

“For insurance, insurance brokers and insurance agents have driven the large increase in average premiums,” APRA says, referring to the 2015-2021 period.

Total finalised PI claims cost stepped up by around 35% from an average of $310 million per annum over 2009 to 2013 to an average of $420 million a year over 2014 to 2021.

APRA says the step-up in cost in 2014 was mainly driven by a 60% increase in large claim costs, the result of an increase in the volume of large claims.

For public and products liability, overall GWP grew by 53% since 2015, made up of a 40% increase in average premiums and a 9% rise in risk counts.

Total premium volumes grew slowly from 2009 to 2016 at an average increase of 1.5% per annum and then escalated from 2017 to 2020 at an average increase of 11%, increasing from $1.9 billion to $2.9 billion.

“This escalation appears to be in response to increases in claims costs,” APRA says.

Public and products liability finalised claims costs stepped up by 30% from an average of $720 million a year from 2009 to 2013 to an average of $940 million from 2014 to 2021.

The step up in cost in 2014 was mainly driven by a 50% increase in large claim costs. APRA says a large public liability claim is one that is above $500,000.

The database was created in January 2005 and in this latest update the regulator collected data up to December 31 2021 to explore trends in the affordability of these insurance products and discuss the key drivers of these trends.

Click here for more from the database.

Contact HDL for further information.