What Drives Up Business Insurance Costs in Manufacturing

Business Insurance Costs in Manufacturing

You’re in the manufacturing business and you may be asking yourself “What drives up business insurance costs in Manufacturing?”

Having worked with manufacturers for over the past 40 years I can identify two major issues that drive up business insurance costs in Manufacturing.

My comments below are relative to a manufacturer’s peer group, meaning what drives up insurance costs for a widget manufacturer compared to other widget manufacturers.

The first factor that will drive up the business insurance costs in Manufacturing is claims.

Have more than the average number of claims in your recent history – meaning over the past 5 years and you’ll pay more than your peer group.

It only stands to reason.

The insurance pricing equation is based on years and years of actuarial history for every specific type of manufacturer, and for each line of business.

Whether that’s workers’ compensation, general liability, auto, or property insurance.

Insurance underwriters know that the rates they can deploy on an account are based on historical averages and they weigh those averages for each specific account’s actual loss experience.

Much of this is done by computer rating systems, but some of it is done by gut – meaning the underwriter’s gut instinct after reviewing your claim history.

So, if your claim history is above average you’ll pay more than the average.

If claim experience is well below average, you’ll pay rates well below average.

Should you give up hope if your claims are high?


But my suggestion is to double down on risk control which we’re going to discuss next so that you can bring your claims in line or below average.

The second factor that will drive up or down business insurance costs in Manufacturing is their attention to risk control.

Risk control is the documented process of preventing claims and minimizing the cost of claims that do occur.

Firms that have a culture based on safety and safe operations typically will have a well-documented risk control process, they have risk control meetings, they have goals, they have metrics related to safety and loss prevention, and it is embedded within their company culture.

When you can demonstrate a robust risk control process to underwriters you will outperform your peers.

You’ll also be outperforming your peers with regard to claims because good risk control programs ultimately lead to lower-than-average claims.

A point I just mentioned that I want to highlight is when you can demonstrate robust risk control.

If you’re in the market for business insurance and you’ve got a great risk control program that should be the focal point your insurance broker is highlighting to underwriters.

Too often, firms that do a great job at controlling risk don’t get the pricing credit they deserve because their brokers aren’t talking about it when they shop the market.

This is a huge missed opportunity and why we put this front and center in our Strategic Marketing Process.

Other factors that drive business insurance costs in Manufacturing:

There are of course other fixed factors that drive insurance costs up for manufacturing firms.

Things like:

The types of products you make.

Toy manufacturers will pay more for products liability insurance than say a textile manufacturer.

The facilities and buildings you manufacture your products in.

If your manufacturing plant is in an area without fire hydrants or the construction of your buildings is made of wood you’ll pay more than a firm located within city limits, they have robust sprinkler systems, and non-combustible structures.

Have a particularly dangerous work environment?

You’ll pay higher workers comp rates than in a low-hazard environment.

The business insurance costs in Manufacturing business are very dependent on your specific operations, your claims history, your risk control processes, your underwriting factors, and the coverages you purchase.

Here’s the bottom line on what drives up business insurance costs in Manufacturing

If you’re a manufacturer and you’re frustrated by the cost of business insurance you need to take a look at several factors.

The biggest variable factors I mentioned above are risk control and claim history.

You can’t do much about fixed factors like your location or manufacturing facility.

If you don’t have a process around risk control and claims control then I suggest working with a skilled broker, like The Coyle Group who can help get your company in shape to beat above-average costs.

If you’d like to continue this conversation and see how we can help you reduce costs and improve your protection, why not contact me?

On my website click the let’s chat button, and if you’re on YouTube you can see in the description box below my contact info and actually book a call directly on my calendar.

Let’s chat and see if we might be a good fit for you and your situation.

I promise when we connect – no hardcore selling or pressure.

Just a conversation to see if we might be a good fit for your situation.


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