‘Why is my commercial property premium increasing?’ As a property owner, this is likely a question that you’ve had top of mind lately. There are many factors driving rates up right now.

Let’s discuss the reasons why your commercial premiums might be increasing, as well as what you can do to counteract these surges.

factors that are driving up commercial property premiums

What factors are driving rates?

the global pandemic and subsequent economic uncertainty

Pretty self-explanatory—and expected!

increase in natural catastrophes that occur

From rising global temperatures to cyclones, hurricanes, tornados, and tropical storms, there has been an increase in not only the frequency of natural catastrophes but also the severity of those events.

increased costs 

Second, you have to address the cost to rebuild after such a catastrophe. In most cases, the cost to rebuild often exceeds tens of billions of dollars depending on the damage done.

In addition to this, the cost to rebuild right now is sky high due to:

• Price inflation of materials
• Labor shortages, and
• Supply chain issues

Companies at high risk of natural catastrophes (i.e. tornadoes, hurricanes, hailstorms, and wildfires) are seeing the highest rate increases, as well as non-renewals and difficulty securing coverage. In fact, in wildfire areas of California and wind zones of Florida, rates have increased by over 20%.

what can commercial property owners do to reduce premiums?

When it comes to battling increased commercial premiums, risk mitigation is your golden ticket.

Property owners who have been working hard to mitigate risk and decrease claims are likely to receive more favorable terms and conditions—and possibly lower rates.

So what steps can you take as a property owner to mitigate your risk and therefore lower commercial premiums?

review your policies (before they expire!)

Did you know that, according to research, commercial properties were undervalued for underwriting purposes by more than 30% in November 2021 policies annually?

The solution to undervaluation? We recommend more frequent, in-depth property risk appraisals, that take the following into account:

• Extreme weather events
• Potential supply chain hurdles
• Inflation trends

take control of your insurance narrative

Don’t leave your insurance narrative to underwriters. Instead, partner with your insurance broker and/or risk representative(s) to reduce risks wherever possible.

Property owners might consider taking a look at the elements below to create the most favorable underwriting profile, which then leads to the most favorable terms, conditions, and pricing:

• Take inventory of assets
• Identify current exposures and cost drivers
• Tailor contracts to the current environment
• Revisit existing risk management techniques
• Highlight business continuity plans and loss control measures in place
• Build a company culture focused on safety
• Manage claims efficiently
• Be weather-ready

Remember, underwriters are more critical of property (now more than ever!). You should anticipate them to ask in-depth questions about what you’re doing to control your risk for employees, tenants, and visitors.

As a property owner, it’s important to ensure your property is adequately protected against water damage. (Trust us, it’s no joke!) Read on to learn ​​why water damage is a top insurance loss.