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How Inflation Affects Insurance Premiums

As the cost of living in Australia continues to rise, so do insurance premiums. Inflation, which refers to the increase in prices of goods and services over time, can significantly determine the cost of insurance for businesses. In this post, we explore how inflation affects insurance premiums and how you can manage the impact on your business.

Inflation can impact insurance premiums in a few different ways. Firstly, as the cost of goods and services increases due to inflation, insurance companies may face higher costs to repair or replace damaged property or pay for car parts or labour. This has recently resulted in higher insurance claim costs, leading to higher premiums.

Secondly, inflation can impact the investment income of insurance companies. Insurance companies invest the premiums they collect to generate income and pay claims. When inflation is high, the returns on those investments may not keep pace with the rising costs of goods and services. This can lead to decreased investment income, which can result in higher premiums for policyholders.

One of the big 4 accounting firms has recently estimated that insurance premiums will likely increase 10% over the coming year.

Strategies to Manage the Impact of Inflation on Insurance Premiums

While it’s difficult to avoid the impact of inflation on insurance premiums completely, there are some strategies that business owners can use to manage the impact. One is to review your insurance covers and ensure you have the optimal cover. It’s no use paying for something you no longer need or have too much cover.

As your business evolves and changes, your insurance needs may also change. By reviewing your policies regularly, you can adjust coverage levels, type of cover, and excesses to help manage the impact of inflation on premiums.​​​​​​​

Finally, ask your insurance adviser to suggest risk management strategies that reduce your insurance costs and shop around to compare prices from different insurers.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.


Adroit Insurance & Risk, ABN 75 078972 700, AFSL 244 348

This article originally appeared on Adroit Blog and has been published here with permission.

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