Builder liability premiums have climbed steadily since 2019, even for operators with a clean claims record. A federal inquiry now underway could reshape the rules behind that cost. Here is what is actually moving, and why it matters before your next renewal.

Public liability cover is one cost most builders never think hard about. You renew it because a head contractor, a council or your licence demands it, you file the certificate of currency, and you move on. The problem is that the price keeps creeping up, and for a lot of builders it has been creeping up for years regardless of how safely they run their sites.

That is not a coincidence and it is not bad luck. The cost of liability cover is being pushed by a specific set of pressures that have very little to do with any individual builder, and in 2026 those pressures are squarely on the political agenda. A federal parliamentary inquiry into small business insurance is underway right now, with construction named as one of the sectors feeling the squeeze. The outcome could change the rules that sit behind your premium, which makes liability cover one of the more important moving costs to track when you are running a building business on margins that are already tight.

How much have premiums actually moved?

The numbers are blunt. According to the prudential regulator’s claims database, public liability premiums across the economy have risen by around 40 per cent since 2015, outpacing general inflation. The Insurance Council of Australia puts the increase for small businesses and not-for-profits even higher, at roughly 55 to 60 per cent since 2019.

For most builders that has shown up as a slow, grinding drift upward at each renewal rather than a single shock. But it adds up, and it has been happening even as the broader commercial insurance market softened through 2025 and into 2026. That gap is the part that confuses people. The big, brokered programs that cover large construction projects have been getting cheaper, with some construction lines down 5 to 15 per cent. The annual public liability renewal for a small or mid-sized builder has not followed, because it responds to a different and slower-moving set of pressures: the cost of claims.

Premiums are rising because the cost of settling a claim keeps climbing, not because builders have suddenly become more dangerous.

What is actually driving the cost up?

Insurers price liability cover on what it costs to settle claims, and that number has been climbing on several fronts at once.

The first is the rising cost of bodily injury claims. The average size of a finalised bodily injury claim has grown by about 5.5 per cent a year since 2013, and work injury claims now run at roughly double the size of other bodily injury claims. The second is what the industry calls social inflation: a more litigious environment, larger court awards, and a rise in psychological injury and nervous shock claims that are harder to predict and more expensive to settle. Layer on construction cost inflation of around 40 per cent since 2020, and every claim that involves repairing or rebuilding damaged work simply costs more to resolve than it did a few years ago.

None of those drivers care whether you personally have ever lodged a claim. Insurers price the expected cost of risk across their whole book, so a clean record helps at the margins but cannot insulate you from a portfolio-wide repricing. That is why so many builders feel they are being punished for other people’s claims. In a sense, they are.

The construction-specific pressure: worker-to-worker claims

One driver sits much closer to the building site than the rest, and it is the one most builders underestimate.

Insurers and reinsurers have flagged a sharp rise in what they call worker-to-worker claims. This is where an injured subcontractor or labour hire worker, who is not your direct employee, brings a damages claim against the head builder or another party on site rather than going purely through workers compensation. On a busy site running multiple subbies and labour hire crews, the exposure is real, and it lands on liability policies rather than workers compensation. It is one of the reasons insurers have been loading premiums and lifting excesses specifically where subcontractors are involved in injury claims. It also sits alongside separate movement in the state workers compensation schemes builders pay into, where premium pressure has been a live issue for construction employers.

The practical defence has not changed, but it matters more than ever. Confirm whether your subcontractors hold their own cover before they start, sight a current certificate of currency every time, and keep it on file. An uninsured worker on your site is not just a compliance gap. It is a direct line into your premium at the next renewal, and potentially into a claim you did not see coming.

The reform fight that could change the rules

Here is the genuinely current part of the story, and the reason this is worth paying attention to right now rather than filing away.

In November 2025 the federal government referred a full inquiry into small business insurance to the Parliamentary Joint Committee on Corporations and Financial Services. Submissions closed on 6 March 2026, public hearings with insurers, brokers, lawyers and small businesses are underway, and the committee is due to report by 27 October 2026. The inquiry is looking directly at why premiums for products like public liability have risen, why cover has become harder to get in some sectors, and whether the rules around it are still fit for purpose. Construction is one of the sectors specifically identified as being under pressure.

The Insurance Council of Australia has used the inquiry to argue that the real driver is outdated law. It is calling for a national review of civil liability and tort law, the first serious look since the Ipp Review in 2002, along with caps on legal fees in lower-value claims and a crackdown on claim farming, the practice of soliciting injury claims through cold calls and online campaigns. Its case is that legal costs and an active litigation environment are eating money that should be reaching genuinely injured people, and pushing premiums up in the process.

Lawyers are pushing back hard. The Australian Lawyers Alliance argues that insurers have not produced the data to prove legal costs are the primary driver, and warns that winding back civil liability protections would simply shift the cost of injury onto injured people and the public health system rather than reducing it. It wants the committee to demand far more detailed premium and claims data before legislating anything. The committee will weigh both positions, and whatever it recommends in October will shape the direction of liability cover for years.

The procurement trap builders should watch

One reform the Insurance Council is pushing is squarely relevant to builders, and worth knowing about regardless of how the inquiry lands.

The Council has argued that government and council procurement often forces small operators to carry more insurance than the job actually requires, or to sign agreements containing broad indemnity clauses that transfer risk they cannot realistically insure against. Its point is sharp: many of those extended contractual indemnities would not even be covered by a standard public liability policy, so the builder is wearing exposure they have paid a premium for and still are not protected against.

That is a live issue on building sites today. The indemnity clauses buried in a head contract can quietly hand you liability for things well outside your control, and they often sit alongside a demand for a $20 million cover limit that the actual scope of work does not justify. Reading those clauses before you sign, and pushing back where the cover required does not match the risk, is one of the few levers a builder genuinely controls in all of this.

So will premiums come down?

Not quickly, and not on their own. The softer commercial market may take some of the heat out of renewals at the larger end, but the core drivers pushing small builder premiums up, claims inflation, social inflation, construction cost growth and worker-to-worker exposure, are structural. They do not reverse because the cycle turns.

The one thing that could meaningfully shift the trajectory is the reform debate now playing out in Canberra. If the committee backs civil liability changes, premiums in the worst-hit liability lines could ease over time. If it sides with the lawyers and demands more evidence first, the status quo holds and the slow climb continues. Either way, the answer arrives in late 2026.

Until then, the move is not to chase the cheapest policy but to treat the cover as a business strength, declaring your risk honestly, keeping subcontractor certificates current and reading what your contracts actually require. That is what protects your margin while the bigger fight over the rules plays out above your head.

Want straight-talking analysis on the business side of building, without the headlines and hype? Tune in to The Good Builder Podcast and subscribe to our newsletter.

Last updated: June 2026

General information only. This article provides general information for Australian builders and is not financial, legal or insurance advice. Insurance needs, pricing, cover requirements and licence obligations vary by state, occupation and individual circumstances. Speak to a licensed insurance broker about cover appropriate to your business before making decisions.

Your Questions Answered:

Why has my public liability premium gone up when I have not made a claim? Insurers price on the expected cost of risk across their whole book, not your individual record. A clean history helps at the margins but cannot insulate you from a portfolio wide repricing.

How much have public liability premiums risen since 2019? Roughly 55 to 60 per cent for small business since 2019 (ICA), and around 40 per cent since 2015 on the regulator’s longer run data, both well above general inflation.

What is a worker-to-worker claim and why does it matter for builders? An injured subbie or labour hire worker claiming against the head builder rather than going purely through workers compensation, which lands on liability policies and is driving premium and excess loadings.

What is the federal small business insurance inquiry looking at? Why premiums have risen, why cover is harder to get, and whether the rules are fit for purpose, with construction named as a pressured sector. Referred November 2025, submissions closed 6 March 2026, hearings underway, reporting by 27 October 2026.

Could public liability premiums for builders come down? Not quickly. The drivers are structural, but the reform debate before the inquiry could shift things, with the answer arriving in late 2026.

Author: TGB Editorial