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Commercial property insurance has come a long way in the last decade, and climate change is only part of the reason that brokers can expect a more robust insurer response

IT SEEMS HARD to believe, but to a typical property insurer 10 years ago, the impact of possible natural disasters on a business outside of northern Australia was not the main consideration in the risk assessment process. “Insurers would base 90% of their underwriting on the client’s occupation, with minor thought to the peril exposure,” says David Hoffmann, head of underwriting at Vero Insurance. Fire, theft, and any dangerous activity that was part of the business were the central focus of the underwriting process. Fast-forward to 2022, and one of the prime considerations is geographical location. And not just the town or suburb. “Now it comes down to where exactly in the street the business is located,” says Hoffmann.

Vero provides quality business insurance products to help protect Australian businesses. Because Vero believes that impartial specialist advice is paramount when it comes to selecting insurance, it offers its products through insurance brokers. With over 180 years of experience in providing insurance, Vero delivers an award-winning claims service so brokers can be confident in recommending Vero to clients. Vero provides brokers with access to one of the largest risk engineering teams in Australia, as well as local BDMs, underwriting and claims teams who bring expertise, intelligence and experience to their relationships.

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“Due to detailed [flood] modelling, the same risk in the same street may well get a significantly different price”

David Hoffmann, Head of underwriting, Vero

However, he adds, nonprofits have been resilient. “Most of our insureds are not only recovering back to their pre-pandemic state, but are in fact expanding,” he says. Parvathy Sree, vice president of nonprofit underwriting for AmTrust Financial Services, agrees. She says some nonprofits, such as homeless shelters and schools, adapted particularly well to the challenges. “Nonprofits with good management and decent financials were able to survive the last year and are seeing the fruits of their hard work and diligence,” Sree says, but she cautions growing organizations to be diligent with loss control and risk mitigation, emphasizing that while claim counts are down and court cases are in limbo, things could change.

“Due to detailed modelling, the same risk in the same street may well get a significantly different price.” The fact that different suburbs in the same city can get different pricing for storm exposure hints at how sophisticated the insurer response has become, not just in relation to climate events but across all types of risk. The result for customers and brokers is a much more robust insurance response. Vero is encouraging brokers and their clients to consult earlier in the decision-making process,

starting at the property selection stage rather than leaving insurance to an afterthought. A long-standing Vero customer in the food sector was looking to build a facility in a new location to replace a site nearing the end of its operational life. Vero worked closely with the customer, ensuring the design avoided the use of flammable materials and included the necessary fire protection systems to protect their investment. “The opportunity to consult at the design stage ensures plans comply not only with standards but also with what’s required from an insurance market perspective,” says Vero’s executive manager of risk engineering, Richard Fenton. Heading off disaster Mitigation of risk is one such area. Vero has one of the largest risk engineering teams in Australia and New Zealand who work collaboratively with brokers and their clients to deliver innovative solutions that help mitigate risk and minimise the likelihood of damage. Risk engineers have a key role to play here.

Any kind of business impact

Fenton gives the example of a customer with a manufacturing facility located in a flood zone who had previously built a flood wall that still required time-consuming sandbagging to seal site access points. “We worked with the customer and their engineers on the design and implementation of a seal that could be easily applied once the portable flood gates were activated,” says Fenton. Just as important as a detailed analysis ahead of any risk event is the ability to see the wood for the trees once disaster strikes. Modern insurance methods and thorough understanding of the customer’s particular set of circumstances ensure that worthy businesses do not fall through the cracks. During the recent flooding in Queensland and coastal NSW, an insurance sector embargo on writing any new business threw a spanner in the works of a property deal that needed to be settled that week. The client was mainly looking for fire cover to be able to complete the purchase. “Vero worked with the broker to tailor insurance for the client to ensure the purchase of the building could happen within the agreed time frames,” says Hoffmann.

“The opportunity to consult at the [building] design stage ensures plans comply not only with standards but also with what’s required from an insurance market perspective”

Richard Fenton, Executive manager of risk engineering, Vero

Other considerations can also be given to ways to help reduce exposure or assist with a quick recovery after an incident, including continuity plans. Enabling tailored solutions Vero can assess and action claims much faster than a decade ago using both technology and a response tailored to individual needs to help make the experience more efficient. This is important in terms of getting businesses back to trading as quickly as possible and expediting repairs so that cash flow can restart when business returns to normal. Luke Whenman, head of commercial property and specialty

claims at Vero, says partnering with selected commercial builders who might operate outside insurance ensures access to the specific skills and experience needed to repair commercial premises during natural disaster events. “They also have access to a broader trade base and understand how to work with the policyholder and their broker on solutions to get their business back up and operational as quickly as possible.” In one claim, Vero worked closely with the insured’s builders but engaged its own supply chain and builders to act as project managers on the site. This significantly sped up the repair process, allowing repairs to be completed in time for the Christmas/New Year peak period, thus avoiding further financial strain on the business.

Impact of 2019 floods on small businesses in Townsville

In another case, after a fire at a medical centre, the building needed repairs as soon as possible to minimise disruption to people with ongoing health management issues. “Vero prioritised the restoration of power, making the decision to engage the practice’s usual electrician, saving time and money while supporting the local community.” An interim payment was made within two weeks to keep the centre running. Repair schedules were arranged to allow operation as close to ‘business as usual’ as possible throughout the entire repair period. In the end, the centre was closed for just two days before doctors were able to consult again. “In addition to the public health benefits, this approach also minimised the insured’s loss of consulting fees, as well as any ongoing losses caused by patients changing doctors,” says Whenman. A detailed understanding of the situation on the ground, preparation to anticipate and minimise damage in the first place, and robust support after any event that takes into consideration the needs of the business as an ongoing enterprise are all part of modern property insurance. Insurers like Vero have the resources and understanding to provide solutions to specifically address broker and customer needs. This is an important factor for brokers as they face an ever more complicated risk ecosystem, from assessment to claims, repairs and beyond.

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Business interruption

Closure for longer than three months

Physical damage to building or contents

68%

61%

28%

34%

Source: Insurance Council of Australia; data as of 3 May 2022

2022 flood claims – SE Queensland and NSW

Number of claims

197,000

Value of claims

$3.3bn

Source: Australian Competition & Consumer Commission

Any kind of business impact

Impact of 2019 floods on small businesses in Townsville

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