This past year, all industries have seen an increase in their insurance rates. Although these changes are out of our control, we wanted to properly educate you so you are aware of why these increases are happening.
If you read our blog about personal insurance rate increases, stick with us here. Some of the reasons are similar, but we break it down specifically what is affecting the commercial insurance world.
We spoke with one of our commercial insurance experts, Andrew Mudge about what trends he is noticing when trying to place a client with an insurance carrier.
The biggest thing that Andrew has noticed is that carriers are being more particular about who and where they are writing insurance policies.
Andrew says, “Insurer's invest in "safe investments" with premiums they take in. In the past treasury bonds and mutual funds have been "safe". With the Fed raising rates to curb inflation there is a lot of uncertainty in the marketplace across the board. Insurance companies can't count on their investment gaining 5% so they have to be more careful with who they insure in case of large losses because the "bank/investments" may be a loss if they have to cash them out.”
Along with insurance carriers needing more "safe investments", we are also noticing similar increases as personal insurance, but they affect business insurance a little differently.
Catastrophic Losses
Unfortunately, severe weather events are on the rise. Areas that normally do not endure weather damage are starting to emerge. This is forcing insurance carriers to rezone areas that are predicted to now see these events. This will increase your premium, especially if your business is in the designated area.
Underinsurance
As a business owner, do you reach out to your insurance agent whenever you make changes to your business? If the answer is no, there is a chance you are underinsured. Having an accurate appraisal of any business changes is very important to make sure that you are fully covered if you experience a loss.
A reason that people may not have accurate coverage is because this will raise the premium on your insurance policy, which means you are paying more out of pocket. No one likes a premium increase, but it is less expensive than experiencing a significant loss while being underinsured.
Property Replacement Cost Increase
When a business rebuilds after a loss, building materials, labor, and other resources are needed. Inflation is currently making it more difficult to complete building tasks, as the price for all of the materials and even the labor itself is significantly increasing. This is forcing an upward pricing shift in nearly all aspects of rebuilding, or remodeling.
Labor Shortage
In the past three years, there has been a 16% increase to wages and salaries for rebuilding efforts. Unfortunately, that increase does not match the current inflation trends. This is still creating the issue where companies are struggling to find the qualified workers to complete the jobs.
Many union industries are on strike, or considering a strike in the future. This has a ripple effect within all of the affected industries, and will cause rates to rise because of higher risk with less people working.
Property Rates
For years, escalating loss trends have outpaced rate increases, primarily because of the costs of catastrophes, severe weather and large fires. Expect carriers to raise rates again this year to close the gap.
Additionally, we are seeing worker shortages and strikes, building costs, supply chain issues, and other critical problems outside of a businesses control.
We hope this information was able to give you a clear understanding of why we are seeing the price changes. We hope to continue to educate you whenever things like this tend to appear. If you would like to talk about your policies in detail, please give us a call at (303) 279-9700, or fill out the form below.
We understand that as a business owner, these rate increases are something that can be detrimental to your business. Even if your business has not had to file a claim, these factors