What Factors Will Increase Business Insurance Premiums – 2022

You may have just received your business insurance premiums renewal and are experiencing sticker shock.  Or, you’ve been pricing out business insurance and want to know what factors will increase business insurance premiums.

In this video and post, I’m going to cover those issues and more, coming right up.

So, what factors impact or increase business insurance premiums and rates?

There are several, but in 2021 and moving into 2022 the biggest factor has got to be market conditions.

The insurance marketplace moves in cycles from hard market to soft market conditions.

Right now in 2022 we’re in a hard market and have been for the past few years.

Some coverages like commercial auto and D&O or Directors and Officers Liability insurance have been particularly hard hit over the past 3 or 4 years.  While workers compensation insurance for most parts of the country has seen price decreases.

Hard markets are triggered by rising claim costs for insurers, increased litigation, increases in weather-related claims as well as several other factors.

For areas of the country like the west coast, some areas of the south, and coastal areas we’ve seen pricing go up for business owners’ policies and property policies due to weather-related claims, wildfires, wind and hail storms, and flooding.

I suspect we’re going to see weather and natural disasters continue to push rates higher for property insurance and business owners’ policies near future.

On an individual level, these are the biggest factors that will impact your business insurance premiums

The first is claims.

Generally speaking, one claim is not going to impact your rates greatly, unless it was a significant dollar value.

But, have a few claims in a few years and you’re going to see your rates increase. This is true across the board for all lines of coverage – business owners or BOP policies, workers comp, business auto, etc.

In fact, in the workers’ comp policy there’s a mechanism that directly addresses claims called the experience rating factor. Have more claims than the expected rate of claims and you’ll have a debit factor applied to your policy which can stick with you for up to three or more years.

If you have a commercial auto policy and you hire drivers with poor driving records, or your existing drivers have poor driving records you’ll probably see your rates rise due to the increased risk of claims.

Increase in rating exposures

Of course, if you have an increase in payroll, sales, number of employees, or increase the number of vehicles in our business you’ll see your premiums increase.

This can happen on renewal and/or on an audit of a prior policy term.

this stands to reason – your business increases, your business insurance costs are going to increase, and for the most part, this is good news – your business is growing.

Not complying with loss control

if your insurer has performed a risk control or loss control visit and identified factors that they want to be improved and you don’t implement those recommendations, you can see an increase in your premiums.

Commonly we will see simple recommendations like having fire extinguishers inspected and tested, improving general housekeeping, creating a safety plan, etc. made and the business owner ignores them.

I get it, you’re busy, and don’t have the time for this.

But, ignoring risk control recommendations will often bump up your rates and premiums for all forms of coverage. It sends a signal to underwriting that you don’t care about minimizing risk and that they have to build in a cushion to their premiums to cover potential claims that are more likely going to happen.

So, what can you do to combat rate increases?

The answer to that question is going to depend on several factors.

Let’s start at the top with claims and loss control. If your company is experiencing problems with claims you can do something about it. This is where an expert insurance broker can help identify potential problem areas and create strategies around those issues.

For example, let’s say you have had several employee slips and fall claims – working with a knowledgeable broker they may be able to identify the root cause of those slips which result in falls and injuries to employees.

It could be wet floors, icy conditions outside, or slick work surfaces, and then recommend proven methods to prevent or minimize those claims from occurring.

I’ve recommended the implementation of non-slip footwear for employees as well as better housekeeping to reduce water on floors and have seen a dramatic decrease in those types of claims.

The point is that working with an expert who can bring risk management knowledge and solutions to you may prove to be very valuable to help manage insurance costs, but also reduce the indirect costs that impact your bottom line with every claim and when it comes to loss control or risk control, it’s important to think it won’t happen to you, or that you’re too busy.

I’ve seen these issues in the past get away from some business owners with a complacent attitude to the point where getting insurance at any price was difficult.

Market conditions and weather are pretty much out of your control. So what do you do?

Here, I would recommend speaking to your broker about what they think they can do to help mitigate price increases. If you feel like you’re not getting the whole truth, or you’re getting a run around then it might be time to look for a new broker.

What you’ll want to look for is someone you like and feel is trustworthy.

You’ll also want someone who represents a broad cross-section of the marketplace and has the tools to help address the situations you face.

This can include risk management expertise, a risk management library to help you write safety plans and such, and provide information and strategies around reducing risk.

I would recommend going to an independent agent or broker and not a direct or captive writer or even an insur-tech firm.

Direct or captive agents can only offer you one option – the company they work for.

Insur-tech firms usually can only quote one insurance company as well, or, if they can quote multiple companies, most do not have the skill set or tools to help you reduce risk and get you on the right track.

By the way, my firm represents a very broad list of insurers, programs, and markets globally and we have the risk management library, tools, and expertise to help you, and we have a professional and friendly team to be there with you after the sale to answer questions, get your certificates of insurance when you need them quickly, and be your advocate.

If that is the type of insurance broker relationship you’re looking for, why not give me a call, and let’s chat.

I promise no hardcore selling – just some honest conversation to see if we might be a good fit for you and your company.

Thanks!