“What can I do to reduce my rapidly increasing business insurance rates?”
This is a common request that we, as insurance agents, receive almost daily. I understand the concern and stress that inflated insurance pricing causes business owners and I do have some recommendations to provide which could alleviate these rates. Before jumping into those, I quickly want to explain the causes for the pricing increases most businesses are facing. Many business owners interpret the current pricing environment as solely being related to corporate greed on the side of large insurance companies. While yes, trying to reach certain profit margins is one of the spokes in the insurance wheel contributing to the increased pricing every business is experiencing, however, there are many other contributing factors as well which I will generalize here.
First, it is important to understand the concept that insurance companies are in the business of risk management. To manage the risks they agree to insure, they must calculate what their expected insurance claims payouts will be over a future time period. To do this, insurance companies utilize a number of predictive modeling approaches to come up with their estimations. These include historical data on past claims, weather pattern trends, new / increasing industry risk exposures, economic stability, crime rates and many other factors. When all these separate components are pulled together, insurance companies use complex mathematical and statistical models to analyze all this data and predict their future claim payout expenditures. All of these areas factor into a business’s insurance pricing.
This complex method allows insurance companies to come up with a pretty accurate prediction of future claims and payouts. That is until unexpected (unpredicted) circumstances arise which cause the spokes of the insurance wheel to start bending and breaking within the predictive modeling analysis. The last few years have produced the perfect storm in this regard because a number of unforeseen events occurred which caused these predictive claims analyses to be grossly underestimated. These surprise events included:
- A drastic spike in inflation
- Numerous national disasters such as floods / tornadoes/ wildfires/ hurricanes
- Significant upticks in crime / theft/ vandalism
- Increased traffic congestion / overcrowding in metropolitan areas post Covid- all of which contributed to higher frequencies of claims and greater claims payout amounts.
- Increased cost and duration of litigation which has contributed to larger settlements and judgements, resulting in increased cost of claims for insurance companies.
- Increased cost of goods, labor & services, which has resulted in larger payouts for vehicle and home repairs / reconstruction.
- Increased insurance fraud, which often occurs in times of increased inflation / declining economic factors, costing insurance companies billions of dollars annually.
The point to all of this is that rapidly climbing insurance rates is a complex issue involving many factors, not just corporate profit goals.
However, on a more upbeat note, there are some actions I personally recommend businesses look into which have the potential to help alleviate or offset rising insurance costs.
Here is what I recommend:
1) Look into implementing new or refreshed programs into your business that insurance companies find favorable and offer discounted pricing on.
These include:
Auto Safety Programs
Do you have a documented program in place for vehicle maintenance?
Businesses which inspect and care for their vehicles on a weekly basis, statistically, incur fewer accidents and less insurance claims than those that do not.
I recommend looking into creating or refreshing an auto preventative maintenance program, which is documented and shared with your insurance company in order to obtain more favorable pricing.
Educate and train new & seasoned drivers on the expectations of safe driving and what to do in the event of a crash to accurately and quickly notify your insurance company. Proper accident handling methods have proven to reduce the duration and severity of an insurance company’s claim processing.
GPS monitoring of vehicles is highly favored by insurance companies and discounted for.
Employee Handbooks
A handbook for employees which details the rules and expectations of an employee’s role is highly regarded by insurance companies. Have employees sign acknowledgment forms indicating their understanding of these on an annual basis. A well designed, documented handbook with signed employee acknowledgement forms can help reduce time, confusion and litigation on several levels in the event of various insurance claims. Many insurance companies will offer discounts for having a documented system in place.
Safety Meetings
Conduct weekly Safety Meetings, even if they are only a few minutes long. Remind employees of the safety protocols they should be aware of and enforcing that week and have employees sign a form acknowledging the training and verifying their attendance. Even better, assign a lead employee or manager as a dedicated Safety Office in this regard.
Again, many insurance companies offer discounts for a verifiable Safety Program.
Security Features
Incorporate security features into your business that help prevent or reduce theft, crime and vandalism.
These are actions most insurance companies will offer discounted pricing on.
2) Shop your insurance out and place as much of your insurance as possible with the same company to obtain bundling discounts on pricing.
If you haven’t shopped out your insurance within the last three or more years, you are most likely missing out on reduced pricing from a different company. In addition, if your insurance is split amongst different insurance companies, you might be missing out on significant bundling discounts.
3) Review your coverage limits on your existing insurance policies.
Is your coverage up to date? Perhaps you are over-insured in certain areas. Perhaps your insurance is charging you for activities or equipment you no longer engage in or own. Maybe you no longer need an umbrella policy. Perhaps opting for higher deductibles could offer some pricing relief. Were any property updates made to the business such as new wiring, new plumbing, new heating / cooling systems, new roof, etc? Upgrades such as these could reduce the cost of the property or business content insurance.
If you haven’t looked into these areas, or had a qualified insurance agent do so for you, now might be a good time to review your policies, ensure they align with the various aspects of your current business and determine if there are any cost saving changes you could make.
4) Manage your insurance claim filings.
It is no secret that many insurance companies will penalize a business with increased prices for filing an insurance claim. However, what most businesses do not realize is that managing that claim is vitally important to keeping those price increases down. For example, if measures were put into place after a claim, in an effort to prevent reoccurrence of a similar claim happening again, this information should be relayed to the insurance company. If the insurance company is aware of the new measures that were put into place, the impact of a price increase due to the claim could be reduced. A common example is a business putting in a security system after experiencing a theft. An insurance company would look favorably on this action taken by the business and potentially lessen the pricing impact of the claim.
5) Promptly adhere to insurance inspection requirements.
Quickly and properly address insurance inspection recommendations.
Most often after a new insurance policy is written for a business, the insurance company will send someone out for an onsite inspection. If the inspector finds any items or procedures that he or she feels should be addressed, these will end up being sent to the business shortly after the inspection in the form of an inspection recommendation or requirement list. If the recommended items are not quickly addressed, with confirmation being sent to the insurance company (or addressed at all), these will lead to increased insurance pricing. If there are any outstanding items from an insurance inspection, it is in the business’s best interest to address them and notify the insurance company to prevent any price increases in those areas.
In closing, no business likes to receive price increases on their insurance policies, especially large increases that cause them to dig deep into their wallets. However, by staying proactive and being vigilant in the above mentioned areas, a business’s insurance pricing could be reduced or at least kept in check.
This is a contributed blog post by Keith Monti, Account Executive at Burgin Platner Insurance Co. They have locations in Beverly, Woburn, Quincy and Danvers (shortly).
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