APRA Data Highlights Rising Costs in Public Liability and Professional Indemnity Insurance

Since 2015, public liability insurance premiums have surged by 40%, outpacing general inflation rates. This upward trend, which began in 2017, is largely attributed to a deteriorating claims experience. In response, many businesses have opted for policies with higher deductibles, effectively assuming more risk to manage escalating costs.

Bodily injury claims have been a primary driver of increased premiums, with average finalised claim sizes growing by 5.5% annually since 2013. Notably, work injury claims have doubled in size compared to other bodily injury claims, significantly contributing to cost pressures. Additionally, a rise in psychological claims has further exacerbated overall claims cost inflation due to social, legal, and medical factors.

Professional indemnity insurance has also experienced a notable premium hike, rising 27% since 2015. Large and corporate businesses have faced the steepest increases. While finalised claims costs have remained stable, recent data suggests that incurred costs are trending higher, indicating potential future challenges for insurers and policyholders alike.

Directors and officers (D&O) insurance has come under scrutiny for escalating premiums and large claims, particularly concerning side C coverage amid a rise in shareholder class actions. The number of large D&O claims, defined as exceeding $1 million, nearly tripled from 2009-2015 to 2019-2021, driven by a surge in claims above $5 million.

Industries such as construction, retail trade, and mining are particularly affected by these trends. As insurers and businesses navigate these challenges, ongoing data and analysis from the NCPD will be crucial in shaping future strategies and solutions.

For businesses, it's imperative to stay informed about these developments and work closely with insurance brokers to explore options that balance adequate coverage with cost management. Implementing robust risk management practices and regularly reviewing insurance policies can also help mitigate the impact of rising premiums.