Owner Builder Insurance Economics Update

Victorian and NSW Owner Builders Have Their Say

In 2015 Qiducia Underwriting sponsored research program to clarify and update the insurance economics of owner building. 120 first time owner builders were randomly selected to participate. 108 responded and participated. The research program also extended to a sample size of market leading insurance brokers. These brokers are regularly visible through advertising and promotional activities.

Originality and value. This study was aimed at:
1. Updating the refreshing market segment profiles. (Who are owner builders, household profiles, income levels, employment, education etc)
2. Project risks (applying construction and building codes and standards)
3. Pre-construction phase risk mitigation planning and resources
4. Distribution and broker channel effectiveness. Comparing web based offerings to personal and traditional channels.
Findings
1. Broker models remain more effective and efficient compared to other distribution options such as online or web based services, on whole of portfolio basis. When segmenting insurable owner builder projects into insured value, project status (commence works or other), location and owner builder profile characteristics, then the broker model advantage deteriorates and fragments. Commoditisation at the lower insured value is driven by online insurance options.
2. Online owner builder insurance offerings, whilst gaining transactional activity are structured with little or no resource cost elements, resulting from online marketing assumptions. This assumption upon further evaluation was found to be less true when 40% of online enquiries require referral or manual intervention. Online enquiries also were heavily biased towards low value projects, attracting the double whammy of low earnt income (average $125.00, including CC fee), and high cost in attracting clients via google AdWords for example (average $28 per enquiry).
3. Portfolio performance (IBNR loss ratios) remained steady when compared to 2008 and 2013 studies.
4. Intermediaries are more than adequately skilled to write owner builder business. In other words ‘they know what to know’. Commensurably underwriters prefer to restrict and engage junior level underwriting reigning broking staff to over communicate and seeking immaterial documentation to actually assessing the risk. A freeing up of processes is highly desirable and sought after.

The study documented work flows and internal processes resulting in refining previously developed and validated intermediary markets value chain. The competitiveness of the intermediary not only depends on the functioning of broking and the cluster of security arrangements, but also and often most importantly, on the entire chain particularly at the client interfaces.

Owner Builder Insurance Economic update 2015, sponsored by Qiducia Underwriting.

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Qiducia Underwriting

Financial Services Licence No 442158 ABN: 32 097 620 758
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L1, 269a High Street Ashburton VIC 3147
 
Qiducia Underwriting is a trading name of Qamvis Insurance Group Pty Ltd (est 2001)
Financial Services Licence No 442158 ABN: 32 097 620 758