The COVID-19 pandemic is just the latest culprit of increased business insurance premiums. Other recent events including extreme weather and diminishing capacity have also contributed to tightening or “hardening” in the insurance industry.
As premiums continue to rise, businesses need to keep an eye on their coverage and their deductibles, or they might wind up paying more for less.
PWC reports that even businesses that have not filed any claims may see a premium increase of as much as 25%. The increase for businesses that have filed claims can be even higher. However, businesses can manage these increased by making a few changes.
As mentioned above, the hardening of the insurance industry creates higher premiums as fewer insurance companies are willing to take on more risk. This is leading to less competitive premium prices since none of the insurance companies want to have losses. With fewer options, businesses will need to be as attractive as possible to garner consideration.
Businesses may be able to “reduce insurance costs by evaluating their current risk levels against their premiums, validating that data and providing it to insurers,” according to PWC. Insurance underwriters focus heavily on the risks, so being able to show low risks is important to limiting a potential premium increase. A business’s insurance agent or broker can help to identify, evaluate and explain these risks.
Additionally, businesses need to understand their claim history. If they have filed any claims in recent years, they should be able to clearly explain the situation and present compelling documentation to support that claim. Things happen, which is why businesses have insurance, and insurance companies know this. However, questionable, or excessive claims will work against a business trying to keep their premiums low.
A business’s financial situation can also help manage insurance premiums. They should review their cash flow to potentially pay the premium annually instead of quarterly or monthly. This typically reduces the premium. Healthy cash flow and bottom lines can also allow a business to increase their deductible, also potentially lowering the premium. Lastly, if neither of these options are applicable, it’s important that a business’s budget reflects an accurate increase in their insurance premiums.
Improving security is another action a business can take to potentially limit premium increases. Everything from cybersecurity to a better sprinkler system contributes to reducing risk. A short-term investment now to improve the technology infrastructure, add security keypads, or upgrade the sprinkler system could result in long-term insurance premium stability.
Lastly, for businesses with no claim history and low risk, this could be the time to shop for a new insurer. If the business is attractive to the current insurer it will be attractive to their competitors as well.
The best thing a business can do in this market is to keep open lines of communication with their business insurance agent. With all the other things business leaders are focusing on right now, let the insurance agent focus on helping to manage the insurance premiums.