It’s no secret that Australia’s independent breweries have faced unprecedented challenges in recent years, with rising operational costs, interest rate hikes, and declining consumer spending adding significant pressure. Among these financial burdens, increasing insurance premiums have emerged as another subst antial cost, driven primarily by more frequent claims, rising inflation and repair costs, severe natural disasters, and limited insurer competition.

The below provides a more detailed background into what’s been causing the rise in insurance premiums, what breweries can anticipate moving forward, and what you can expect over the next 12 months.

Why Have Insurance Premiums Increased?

Several factors contribute to the ongoing rise in insurance premiums for independent breweries:

• Climate Change and Natural Disasters
  • The number of insurance claims across sectors like hospitality and manufacturing (including breweries) has increased due to more frequent and severe weather events.
  • Floods, bushfires, and storms are causing more property damage and disruptions, leading to larger payouts by insurers.
  • As a result, premiums have risen to reflect this higher risk and cost of cover.

• Increased Reinsurance Costs
  • Reinsurance (essentially insurance for insurers) has become significantly more expensive due to the global rise in natural disasters.
  • These rising costs are inevitably passed down to Australian businesses, contributing to higher premiums.

• Inflation and Rising Operational Costs
  • Inflation has driven up the cost of repairing or replacing brewing equipment, stock, and buildings.
  • Labour, materials, and specialist services all cost more, meaning claim payouts have become more expensive for insurers.
  • These increased costs inevitably trickle down to breweries through higher insurance premiums.

• Surge in Insurance Claims
  • In 2023–24, over 150,000 insurance claims were made – a 75% increase from the previous period. Floods were the most significant contributor to these claims.

*Flood Cover: A Special Note

Flood cover is usually excluded from standard business insurance policies but can sometimes be added if requested with the insurer. Breweries in known flood zones may face very high premiums or be declined cover altogether. It’s essential to assess this risk, explore local council flood maps or tools like Geoscience Australia, and speak with an insurance broker. Where insurance is limited or unaffordable, implementing flood mitigation strategies is advised.

What Independent Breweries Can Expect in the Next 12 Months

The Australian insurance landscape is poised for nuanced shifts in the coming year, particularly affecting small to medium-sized breweries. Here's what to anticipate:

1. Moderation in Premium Increases - Expect an increase of up to 10%, but slower than previous years.

2. Enhanced Risk-Based Pricing - Insurers will increasingly adopt risk-based pricing, rewarding breweries that demonstrate effective risk management with better premiums.

3. Increased Scrutiny on High-Risk Areas - Breweries in disaster-prone areas may face increased difficulty securing coverage, requiring detailed risk assessments and potentially higher premiums.

4. Emphasis on Environment, Social, and Governance (ESG) and Sustainability - Breweries adopting green practices may see premium benefits.

5. Technological Integration - Expect smoother and faster insurance processes through increased technology use, from claims handling to risk assessment.

Strategies for Breweries to Manage Insurance Costs

• Regular Policy Reviews: Ensure your coverage accurately reflects current business risks and operations.
• Enhanced Risk Mitigation: Implement robust safety and risk mitigation strategies. Regular maintenance, staff training, and rigorous safety protocols help prevent claims.
• Work with Experienced Insurance Brokers: A broker knowledgeable about the brewing industry can negotiate better coverage and premiums tailored to your unique needs.
• Invest in Proactive Resilience: Upgrading infrastructure with flood protection measures, fire-resistant materials, or enhanced security can lead to premium discounts and reduce future risk.

Final Thoughts

Understanding the reasons behind rising costs is the first step. The next is taking proactive measures, such as reviewing your current cover, managing risks, and ensuring your insurance reflects the reality of your operations. In many cases, this means working with a broker who genuinely understands the brewing industry.

For a free review of your brewery’s current insurance policy, or advice on flood, cyber or liability risks, get in touch with Midland Insurance Brokers. Their brokers have a deep understanding of the brewery industry and the unique risks independent brewers face. They have also developed unique brewery insurance programs that can be tailored specifically to your brewery’s needs.

Call 1300 306 571 and ask for Damien, email brewery@midlandinsurance.com.au, or fill out the Get In Touch form on the Midland website.