How to Manage the Rising Costs of Insurance Premiums

Inflation, inflation, everywhere! If you feel like “inflation” is the word of 2022, you’re not alone. It seems like no individual or industry is immune to it, no matter what side of the aisle you’re on – including the insurance industry. 

When it comes to actual figures, we’re seeing anywhere from a 2.5% to 50% increase in pricing for various lines of coverage. One of our main areas of focus here at the Concannon Agency is commercial property, and with that line of coverage, experts are predicting an increase between 5% to 15% in the standard market.

Why is this? Due to a number of factors – the pandemic, catastrophic events (floods, wildfires, hurricanes, etc.), supply chain disruptions, labor shortages and social movements – over the past six years, there has been a shift in the market. 

This shift is taking us from a “soft market” (which is when we see lower premiums and rates, better coverage conditions, etc.) to a “hard market” (when we experience limitations in coverage, higher deductibles and premiums and stricter underwriting guidelines). And, because the commercial insurance market is cyclical in nature, this is something we’ve seen before. 

These fluctuations affect the terms, availability and price of commercial insurance. 

During a hard market, businesses can receive conditional or non-renewal notices from their insurance carrier. That’s due to the fact that these underwriters are losing money with the increase in claims, so they’re looking to control their losses.

As an analogy, let’s say you – a homeowner – are looking to rebuild your home after a natural disaster destroyed it. Factors such as increased costs for lumber, labor shortages and increased costs for contracting would result in you rebuilding your home at a much higher value than what you originally paid. This is how the insurance industry is operating; they have to recoup their losses at a higher cost, which is resulting in higher premiums.

Graphics: CRC Group

How to Manage These Rising Costs

Our experts can help you manage these rising costs. Our best piece of advice is to contact our team early on in the process so we can get to work on your behalf as quickly as possible. Our team goes into the marketplace to find the right insurance coverage at the best price, and that requires some advanced time since now – more than ever – underwriters are asking more questions about risks. 

Manage Costs by Managing Risks

And speaking of risk, having a good risk management plan in place is crucial. Underwriters are being more selective with the risks they’re taking on, so having a solid safety program and/or risk mitigation practices in place is key to obtaining the best insurance coverage at the best prices. 

With recent changes like hiring remote workers, some of your risks may have changed without you necessarily even knowing. That’s where we come in! We can help tighten up your risk management plan and advise on certain situations to help you save on premiums. For instance, some of our clients are opting to raise their deductible so their premiums remain lower, knowing they have a solid risk management plan in place.

Loss Control Services for Your Business

Our team also offers Loss Control Services for our clients as part of our risk management solutions. When managed properly, having a Loss Control plan in place can improve bottom-line dividends and can help improve your position in the insurance marketplace.

Through these services, we can also help develop a business continuity plan for your organization, which further helps minimize risks. What this does is help ensure your operations are functional in the case of catastrophic loss (i.e., if a manufacturer has to move out of a facility that is being rebuilt, they’d have the ability to tap into another manufacturing company who can produce the goods without pausing on operations). 

So while insurance premiums are on the rise, there are a few ways to ensure you are obtaining the best prices and coverage possible in this hard market. We’d love to talk with you more about your specific insurance and risk management needs: send us a message to set up a consultation with our team.