Navigating Risk and the Rise of Insurance Premiums
December 18, 2024
Rising insurance premiums are leaving business owners feeling frustrated. Gain insights into internal and external risks that could be affecting your rates.
Rising insurance premiums are leaving business owners feeling frustrated. Gain insights into internal and external risks that could be affecting your rates.
“Why are my rates so high?”
“My friend is also a business owner, and their insurance premiums are not nearly as high as mine!”
If you’re a business owner asking these questions, you are not alone. With open enrollment and renewal season in full swing, many business owners are taking a closer look at their property and casualty insurance rates, and some are feeling frustrated.
It is important to understand that insurance rates are not a one-size-fits-all deal. From where your business is located to the rising frequency of natural disasters, there are many factors that play a role in the rates you receive.
A major part of the puzzle to the rising cost of insurance premiums is your specific business risk factor. There are several variables that determine which “risk pool” your business belongs in; this can directly affect your rates.
Where your business is located does matter. Certain areas carry higher risks based on environmental conditions and previous disaster history. Those who operate in the Midwest may feel safe from disasters such as hurricanes since they are far from the coastlines. However, they are right in the heart of “Tornado Alley” with 2024 being the most active tornado season since 2017.
Certain industries carry a higher risk. For example, manufacturing facilities have higher liability risks than simple office spaces due to their complex equipment and heavy machinery. As well as nonprofits who can have higher rates due to a limited number of insurance providers, reliance on volunteers, and potential liability exposure from serving vulnerable populations.
Do you have the proper safeguards in place for your facilities? If not, you can be categorized as a high-risk enterprise. Through programs such as safe driving initiatives, safety mentors, and staying in compliance year-round, you can proactively reduce hazards to help lower rates. All these mitigation techniques and consultation with your trusted advisor can lower the number of claims filed. Therefore, it helps control factors that would affect your rate.
While some may wish they could control the risk factors around us, there are elements beyond your control that can potentially play a massive role in insurance premiums.
How can a disaster on the other side of the country affect you? Insurance carriers spread their costs across a broad range of policyholders, which in turn can drive up premiums in regions not directly affected by an event.
For instance, if a large portion of the Midwest faces significant tornado-related claims, insurers may compensate for increased risk by raising rates for businesses across the region. Similarly, hail-prone areas see a rise in rates after a particularly destructive storm season.
Additionally, when there is significant damage to a region after a major storm, such as a hurricane, contractors may push up pricing on building materials and supply demand. This in turn will drive costs up as well.
Everything is more expensive lately, from building materials to repairs after a storm. Insurers account for these soaring costs as well, often leading to higher premium prices for property-related coverage.
It is natural to feel overwhelmed when diving into your risks and rising insurance rates. However, you have some control over your insurance program and loss control and, in turn, potentially lower your rates. Some of the best ways to stay ahead of the game are through:
If your rates feel too high, there is a reason and a solution. In today’s landscape finding the right balance between coverage and affordability is crucial. When you know what to expect, you can make informed decisions about coverage and risk management strategies. Connect with a risk expert and discover customized solutions that align with your needs.
