If you’re like most people, your insurance has recently gone up with seemingly no explanation. However, your insurance premiums could be increasing for a number of reasons (but more on this later!).
This leaves many insureds asking, “how can I reduce my insurance cost?” Check out the video below for tips from benchmark’s own Rob Cohen on what you can do to reduce your insurance cost.
Now, let’s take a quick look at why insurance rates are rising.
why are insurance premiums increasing?
D&O, EPLI, Property, General Liability, and Umbrella policies are all going up 15% to 30% year over year.
Below are some factors causing increased insurance costs:
- Increased Risk Factors. The rezoning of certain open areas as high-risk fire zones has increased carriers’ perception of risk and therefore, is driving up prices.
- Re-insurance. Insurance carriers purchase insurance similar to a policyholder. However, due to consistent years of catastrophic losses, the availability has been restricted and costs to insurers has increased.
- Labor Shortages. Changes in immigration law, in combination with stricter criteria for classifying 1099 vs. W-2 workers, have added to the labor shortage post-pandemic markets are experiencing.
- Supply Chain Disruption. Shipping routes are overrun, ports are backlogged, shipping containers are in short supply, and trains are delayed causing domino-like effects to businesses. With increases in cost and time to deliver goods comes an increased risk of in-transit losses and loss of business market share.
- The Pandemic. With all of the increased insurance claims from COVID-related closures, insurance companies have paid out millions in unanticipated claims.
- Inflation. Property values are soaring and insurance premiums are along for the ride. Insurers have become picky about whom they will insure, causing an increase in policy movement from broker to broker and carrier to carrier.
- Increase Cyber Threats. Office-level security firewalls are not present with people working from home. This, in combination with the widespread usage of online payment options in more businesses, has raised the cost of cyber liability coverage.
These seven cost increases are complicated, global, and not going anywhere. Want to know what you can do to get your costs down?
how to lower your insurance cost: according to rob
One of the questions Rob gets asked most is, “-what can I do to reduce my insurance cost?”
We first have to look at what line of coverage you want to reduce the most. “Property and general liability premiums and rates are fairly static in that they are dependent upon location.”
If your business resides in a wildfire zone, there’s really nothing you can do to reduce the cost of that insurance.
remapping of “fire zones”
To a carrier, all insurance companies have become keenly aware of what they now consider fire zones, as well as the concentration of insured value that resides within these zones.
Both commercial and residential insures have undergone varying degrees of re-evaluating what they now consider to be locations residing in, or adjacent to, a newly established fire zone. You may have had friends, or even neighbors, complain of non-renewal notices they received from their current insurer.
Again, to a carrier, underwriters refuse to discuss any type of exception we may want to make regarding their “fire-zone” evaluation. Each carrier has determined, through their re-insurance treaty with their re-insurance carrier, what they are allowed or not allowed to write.
They will not make exceptions for any policyholder, which means remapping for fire zones has forced many policyholders back into the market due to the non-renewal of many policies. This is a market with a limited supply.
insurance you can reduce
Rob explains that “-if we’re talking about employment practices liability, directors and officers liability, cyber liability, many of the underwriters will dig into the underwriting and look for things like current employee handbooks, proper employee policy and procedure disclosures.
On the directors and officers liability side, they look a lot now. On directors and officers liability, underwriters dig into the financials of the insured. They want to make sure that the business is running well and economically sound.
On cyber liability, the underwriters want to understand more about how you are protecting your electronic systems. So these things should be discussed and reviewed with your broker.”
If you have any questions, feel free to reach out to Benchmark or Rob.