Why business insurance premiums increase

Last updated on March 20, 2024 

As a business owner, dealing with rising costs may be on your agenda. Businesses of all sizes are feeling the impact of inflation. Along with rising operating expenses, your business insurance costs may also increase. So, why is this happening and how can you manage the premium?

Business insurance premiums can go up for various reasons, including inflation, market conditions, changes in coverage, industry-specific risks, and other factors. Understanding how these factors affect your premium may help you manage the costs.

From business investment to consumer spending, inflation significantly affects our economy. It causes prices to go up, so we get less for what we pay for. This leads to a rise in the cost of living as people need more money to afford the same level of goods and services.

Inflation can affect your business insurance premium in a couple of ways:

The cost of replacing assets, such as buildings and equipment, rises with inflation. To cover potential losses, insurers have to keep up with these costs which leads to higher premiums.

Medical and legal costs also rise with inflation. Insurers need to provide public liability insurance cover that meets these increased costs, which means premiums go up.

If you need to make a claim, you trust your insurer to cover your sum insured. That’s why insurers consider inflation when calculating your premium. To reduce your risk of underinsurance, your insurer may adjust your sum insured automatically to reflect rising costs.

However, it's not just inflation that affects insurance costs. Other market conditions and factors affecting similar types of business to your own and factors unique to your business can also influence your premium.

Here are some of the common factors that can contribute towards business insurance premiums:
Did you know that insurers also have to pay for insurance? Specialist insurers help cover the cost of claims for major disasters, such as bushfires. This is ‘reinsurance’ and it works in the same way as your insurance. Just as your premium will increase after many claims, your insurer’s will too.
Market conditions can also affect business premiums. These could include changes in the economy, such as an economic downturn. Other examples include new laws, and natural events like floods, bushfires, and hail.
Insurers consider location-based risks when calculating business insurance premiums. If crime rates are high in your area, or it's prone to natural disasters, such as bushfires or floods, this can affect your premium.
Did you expand your business or buy a new vehicle or other assets? If so, you might want to upgrade your policy with some additional cover. If you choose more comprehensive coverage, your premium is likely to increase.
Your claims history affects  your level of risk, which may increase  your premium. Other factors include industry-specific risks and significant changes to your business. These changes could include expanding into new markets or offering new products.
The good news is there are ways to manage rising insurance costs. These practical tips may help you get started:
Long-term insurance planning is especially important during a changing risk environment, or if you’re expanding your business. Review your business insurance regularly and adjust your policy to make sure you have appropriate coverage.
Many insurers offer flexible payment plans, so it’s worth checking your options when you buy your policy. With Allianz, you can pay by the month at no extra cost.1 This may help you manage your cash flow while maintaining continuous coverage for your business.
The costs to replace your business assets may increase because of inflation, so it’s important to review your sum insured. Check your policy to make sure your sum insured accurately reflects current costs and values.
Keep up to date on industry trends and regulatory changes that may impact your business insurance costs. This may help you to anticipate and adapt your insurance accordingly. Our business insurance articles offer useful tips and insights to help you with your decision making.
Implementing a risk management strategy may help you minimise potential risks to your business. For example, improving safety measures and security systems, or offering training programs.
We can’t predict the unexpected, but we can prepare for some insured events, such as storms. Being prepared may help you maintain up-to-date insurance coverage. Visit our extreme weather support page for useful information that may help you prepare before, during, and after an extreme weather event.
Combining your policies may help you manage them and reduce costs. Our Business Insurance Pack has 12 covers2 that you can choose from and combine to suit your business needs.

Your business is your livelihood, and business insurance cover is there to help you financially if something unexpected happens. Business insurance costs may rise, along with other costs, but it’s important to make sure you have appropriate cover for your needs. 

We’re here to help. Reach out to our team of Australian-based Business Insurance specialists if you’d like to discuss your policy.

1. Pay by the month (Payment instalments)
Premiums payable by instalments may be subject to minor adjustments (upwards and downwards) due to rounding, and financial institution transaction fees may apply.

2. Range of covers
Acceptance criteria apply to each cover based on the characteristics of your business and the risks you’re looking to insure.

This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 ("Allianz"). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.  The decision to insure and for what amount is a matter for your determination. You may wish to seek professional advice on these issues.

Any opinions expressed constitute our views at the time of issue and are subject to change. Neither Allianz, nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article.

Allianz acknowledges Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of the lands on which we live and work across Australia. We pay our respect to First Nations Elders past and present.

Any advice here does not take into account your individual objectives, financial situation or needs. Terms, conditions, limits, and exclusions apply. Before making a decision about this insurance, consider the relevant Product Disclosure Statement (PDS)/Policy Wording and Supplementary PDS (if applicable). Where applicable, the PDS/Policy Wording, Supplementary PDS and Target Market Determination (TMD) for this insurance are available on this website. We do not provide any form of advice if you call us to enquire about or purchase a product.

Allianz Australia Insurance Limited ABN 15 000 122 850 AFS Licence No. 234708 is the insurer of any general insurance products offered, and Allianz Australia Life Insurance Limited ABN 27 076 033 782 AFS Licence No. 296559 is the insurer of any life insurance products offered. Each entity is responsible for any statements and representations made about its products, on this website.