Managing Insurance Coverages & Costs – Your Hands Aren’t Tied!

Managing Insurance Coverages & Costs – Your Hands Aren’t Tied!

Each year, property owners approach their insurance brokers with a common question – are my insurance premiums going up? No surprise to anyone, the pandemic, civil unrest, economic uncertainty and an abundance of disastrous weather events influenced losses of over $1 billion in 2020, accelerating an already hardening insurance marketplace – one that is less friendly to insurance buyers. Reinsurance is more expensive, capacity is decreasing with many providers exiting the market, underwriters have become stricter and premiums are on the rise for all insurance lines.

The Council of Insurance Agents & Brokers (CIAB) Q1 2021 Commercial Property/Casualty Market Index reports that premiums continued to rise across all-sized accounts. The average increase in premium prices was 10% in Q1 2021, the 14th consecutive quarter of increased prices. Large accounts were most impacted, with an average increase of 12.9%.

By mid-year you may be tired of hearing that “especially this year,” business owners who educate themselves on the trends that influence their insurance will have a greater understanding of what can be done to influence their insurance rates. But as renewals approach, it’s still solid advice, and there are also some fairly standard practices that will help you achieve your lowest total cost of risk.

Ensure Your Risk Profile and Data Are Accurate

A careful assessment of unique exposures and establishing effective, well-documented risk management practices can make an organization more attractive to insurance carriers. A robust risk management program reduces the likelihood of expensive claims and minimizes unexpected event losses.

Another important consideration is the quality of your data. Property insurance underwriters want a complete and accurate picture of the property they’re insuring. Properly representing your risk (and risk management policies) to the carrier will directly affect the rates and terms offered.

The condition of the property and surrounding neighborhood, age, deferred maintenance, environmental issues, ingress/egress issues, vacancies and other factors specific to an industry sector all impact underwriting (and property tax assessments, by the way).

Review and confirm key statistics like square footage, statement of value (SOV) and construction occupancy protection exposure (COPE) data. If you are more than five years out from your last appraisal and you continue to use Consumer Price Index (CPI) adjustments on your SOV, you risk misstating real property value. Adjustments for CPI do not take into account local changes, such as increased climate activity, economic/social changes that cause building costs to increase/decrease, and exhaustion of local resources that escalate the cost of obtaining raw material.

By simply cleaning up your key information elements and presenting accurate appraised values, you’ll help better position your organization for the best possible coverage rates and terms.

2021 Trends Alert

Insurance experts often examine how outside influences and trends affect the insurance marketplace, and businesses should follow suit to determine what factors impact their insurance coverage. For 2021, there are a number of sweeping market developments to consider.

Rates continue to be affected by “social inflation” (i.e., the impact of societal trends and views toward increased litigation, broader contract interpretations, plaintiff-friendly legal decisions and larger jury awards).

Extreme weather events, such as hurricanes, tornadoes, hailstorms and wildfires continue to make headlines as they become increasingly devastating and costly. Many experts believe severe storms, extreme temperatures, wildfires and flooding are the new norm. As these catastrophes become more frequent, the insurance industry will need to create innovative solutions to keep up with weather-related losses. Expect to see more emphasis around weather readiness, especially from an insurer’s perspective.

Social movements that have risen to prominence in the last decade and throughout 2020 are expected to affect organizations for years to come. Nationwide protests, civil unrest regarding racial equality and diversity within the workforce, the #MeToo movement and the Asian American and Pacific Islander heritage movement all continue the trend of increased corporate accountability in regard to social issues. For insurers, this raises the risk of employment-related claims, alleging discrimination, harassment or other forms of unfair treatment. Policyholders who take the necessary actions to avoid such claims by documenting workplace inclusivity, diversity and social awareness initiatives may reap the benefits of reduced premiums.

And of course, in 2020 and into 2021, COVID-19 has led to many complications in the insurance market – additional exposures across practically every line of coverage, elevated underwriting losses and various policy restriction developments. Although the vaccine offers hope for eventual return to normalcy, many of the pandemic’s ramifications are expected to continue for years to come.

Underwriter scrutiny is at an all-time high. Every aspect of policyholders’ risk profiles is being closely reviewed. In fact, some underwriters are altogether refusing to consider businesses with elevated COVID-19 exposures. While deductible and premium costs are rising, capacity has decreased with more stringent coverage conditions and policy exclusions emerging for pandemic-related losses.

Overall, COVID-19 has significantly tested the preparedness of businesses everywhere. Moving forward, it is critical to take a hard look at business continuity and disaster response plans. Also, partner with experts who understand your industry’s daily risks and can help you prepare for the unexpected.

Cyber attacks are now in the urgent risk category across all industries and the attack range is growing. Cybercriminals are using an ever-evolving and sophisticated array of tactics, targeting employees at all levels of and roles at an organization to gain access to your data. The manufacturing and distribution sectors have continued to implement highly sophisticated technology solutions to manage both process and logistics. While these solutions offer critical benefits, they also present new vulnerabilities to cyberattacks. Underwriters have taken note. Mitigation should involve both cyber risk management and insurance coverage.

2021 Market Outlook Forecast by Line of Coverage

Below is a high-level overview of 2021 forecasted rate trends per line of coverage. For detailed insights by line of coverage, access CBIZ’s 2021 Property & Casualty Market Outlook.

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* Price forecasts are based on industry reports for individual lines of insurance. Forecasts are subject to change and are not a guarantee of premium rates. Insurance premiums are determined by a multitude of factors and differ per organization. These forecasts should be viewed as general information and not insurance or legal advice.

Additional Resources

Your Team

You need more than basic commercial insurance to protect your business assets. That is why our risk consultants partner with you to develop a plan tailored to cover your particular exposures. If you have questions about your risk profile or your current coverage, contact the CBIZ Insurance Services Manufacturing Team or your CBIZ advisor.

Managing Insurance Coverages & Costs – Your Hands Aren’t Tied!https://www.cbiz.com/Portals/0/MFG-DIST Docs/Managing Insurance Costs.jpg?ver=2021-06-16-153506-050Business owners who educate themselves on market trends, carefully asses their unique exposures and establish effective, well-documented risk management practices will be in position to secure the best possible coverage rates and terms. Here’s what to consider.2021-06-16T19:00:00-05:00Business owners who educate themselves on market trends, carefully asses their unique exposures and establish effective, well-documented risk management practices will be in position to secure the best possible coverage rates and terms. Here’s what to consider.NoneManufacturing & DistributionProperty & Casualty InsuranceNo