There are various reasons why business insurance premiums typically increase, including adding coverage or claims experience.  However, these are not normal times, and many business owners are seeing rate increases even if their coverage or claims experience has not changed.  This blog sheds light on why and what can be done to offset some of the increase.

Why Did My Business Insurance Premium Increase?

Like everyone, insurance companies are feeling the impact of inflation.  Though insurance is an intangible product, it covers the expenses we all see increasing, including building costs, labor costs due to worker shortages, supply chain issues, and more expensive vehicles and parts due to technological components.

The bottom line is that many reasons business insurance premiums increase are outside any business's control. 

Business Auto Rates Increase Due to Industry Factors

Rates for both personal and commercial auto insurance policies are increasing. Some of the factors contributing to the increases include:

1. Advanced in-vehicle technologies make many vehicle repairs more expensive.
Consider a 1985 bumper of metal or fiberglass vs. today with sensors and cameras.
2. Distracted driving and speeding are causing auto accident claims rates to increase. A small sample of this can be seen in NH when in Oct 2022, police pulled over 147 drivers within 5 hours who were traveling more than 20 mph over the speed limit.

3. Labor shortages and supply chains are causing repair costs to increase.

4. Rental car rates are increasing, often maxing out policy coverage limits.

All of this results in insurance companies having to pay for more expensive repairs and higher settlements which impacts everyone's premium.

If you have a vehicle you rely on for your business, it is strongly suggested you review your rental limit to ensure adequate coverage.  Body shops are backed up waiting for parts causing repairs to be delayed.  Though not your fault, your policy will not pay more than the coverage limit.  This is especially true if you have an electric vehicle.

Liability Rates Increase Due to Expensive Lawsuits

Liability insurance rates are going up quickly as lawsuits become evermore expensive. Suits settling for unprecedented figures can cost insurers much more, leading businesses to purchase more liability coverage.

Even if your business is never sued, its liability premiums can be affected by others' lawsuits. This is because insurers may recalibrate liability rates for the entire industry if the frequency and severity of suits increase.

Cyber Liability Rates Increase Due to Ransomware Attacks

Ransomware attacks, in which a hacker holds data hostage for payment, are a relatively new risk. They’re quickly becoming a risk that everyone must take seriously, though.

Settling ransomware attacks is expensive, and many insurance companies (and businesses) try to avoid paying ransoms. Even if data is properly backed up and can be retrieved without paying a ransom, however, these attacks still have substantial costs. In addition, the downtime that they cause can result in lost revenues and other costs, which insurance companies may need to cover.

Ransomware is still evolving, as the ransomware insurance sector is likewise. The trend tends to be higher costs for everyone, unfortunately.

Property Rates Increase Due to Higher Values

The recent spike in property values has the side effect of forcing building insurance rates to increase. Buildings should be insured for their rebuilding cost, and their insurance rates thus increase as their values increase.

You probably should if you have not reviewed your building coverage limit recently.  Insurance companies often have inflation guards on property policies, but they may not have kept up.  A call to your insurance professional can help determine if your building coverage is adequate or needs to be increased.

A moderate premium increase may be challenging right now, but in comparison to not being appropriately covered would be worse.

Property Rates Increase Due to Higher Building Costs

Much like auto repair rates are increasing, so too are building costs. Labor shortages and supply chain issues have made repairs cost more and take longer. Higher costs correlate to higher property rates. In addition, extended repairs can correlate to higher business interruption premiums. 

Insurance is global 

Not to go too far into the insurance weeds, it is important to understand that insurance companies also buy insurance.  The insurance companies for insurance companies are called reinsurers and often operate on a global scale to spread out risk.

Unfortunately, business conditions, including climate disasters, ongoing wars, and the global economy, have not been great.  Like all businesses, insurers and reinsurers are paying more to operate, which will inevitably trickle down to consumers.

Ways to Save on Commercial Insurance

1. Look at your policy: An often overlooked way to save on premiums is to review your policies.  Are there vehicles or buildings on the policy you no longer own?  This may sound absurd, but we see this quite a bit.

2. Increase deductibles:  The lower the deductible, the higher the premium and vice versa.  You should choose a deductible that makes sense for what you have readily available to pay in case of a claim.  Insurance companies like higher deductibles as it can remove the more minor claims that take up resources for the carrier (like adjuster fees and inspections.)  Insurance should be used for more catastrophic claims or liability lawsuits, not necessarily smaller ones.

3. Speak with your insurance agent: Insurance agents understand the insurance markets.  A carrier that was competitive one year, maybe less so a few years later, given their claims experience.  As independent agents work with multiple companies, they are in the best position to tell you if your premium is within the average range or may need to be quoted with a different company.  Independent agents, like HPM Insurance, do not work for the insurance companies but instead for you, the client.  

Review Your Business Insurance With a Knowledgeable Agent

Managing higher insurance rates isn’t necessarily easy in the current economic climate. If you’re looking for viable policies that provide robust coverage at affordable rates, consult an independent insurance agent specializing in business policies. A specialized agent will be able to review premiums and coverages, devising a solution that suits your business.

To speak with a knowledgeable insurance agent about business insurance, contact us at HPM Insurance.