What impacts your contents insurance premium?

On September 2, the Insurance Council of Australia (ICA) released a media statement that contains some interesting information about how premiums are calculated for contents insurance.

The statement was made in response to recent articles that drew a link between such premiums and the decreasing cost of some household goods.

The ICA said it didn't want consumers to be misled by such reports.

According to the ICA, the amount of money it costs to replace spoiled or destroyed household goods after a damage-causing incident is just one of a number of factors that are taken into consideration when setting premiums.

The same goes for alterations in crime rates across the country. The ICA stated that "a change in burglary rates has only a moderate impact on premiums in most areas".

Overall, it's the risk of natural hazards that has the most impact on contents insurance premiums. The ICA mentions incidents such as fires and burst pipes as being common.

In addition to this, natural disasters in particular communities will contribute to how high or low a customer's premium might be. The risk such natural disasters pose to home and business owners in certain areas is calculated by "global reinsurers".

This makes sense, given that payouts following natural disasters cost insurance providers billions of dollars. For instance, Queensland's "catastrophe damage bill" has already hit the $1 billion mark this year.

The ICA added that New South Wales is regarded as being at risk of bushfires and storms. To give a specific example, damage caused by ex-Tropical Cyclone Oswald to property and contents in the state has cost insurance providers around $155 million.

If you have any questions about your business insurance premium, or would like to set up business property insurance, get in touch with Elders Insurance today.