As businesses and industries continue their journey to recovery from the ongoing effects of the pandemic, a focus on organizational resilience has never been more important. The continuing effects of COVID-19 have also had a major impact on insurance. Add catastrophic losses from hurricanes, hailstorms, and wildfires to the mix and you’ve got a pile of costly claims.
In addition, surging inflation, supply chain delays and the rising cost of goods have increased the cost of doing business nationwide. Replacement costs for buildings and vehicles have jumped 27% since the end of 2021, labor costs have risen more than 5% and extended supply chain delays have increased logistic costs for business by more than 20%. These issues have insurers raising premiums and reducing limits to cope with the rising cost of claims.
Businesses realize that the only way to obtain competitive insurance pricing in this environment is to be able to present themselves to the carriers as “best in class.” More than ever, they must work with an insurance partner that can provide those services to accomplish that goal. These services include Loss control to prevent loss from occurring, to implement risk transfer practices, safety protocols and property upgrades.
As the global economy prepares for a potential recession, organizations need to prepare for potential premium hikes and take steps to make their businesses a more attractive risk and create strategies to reduce insurance costs. Organizations should:
- Improve their properties’ risk profile. With reduced capacity in the property insurance marketplace, carriers can be very selective with which businesses they choose to write. Therefore, they must implement procedures they may not have been required to do so before such as water mitigation plans, flood deterrent measures, robust fire protection plans that may include installation/maintenance of sprinkler and HVAC systems, central station alarms.
- Prioritize exposures. Organizations may have to take on more risk. This may include changing deductibles, limits, and insurance program structures to identify areas where the company can take on more risk to reduce premiums. The key to this strategy is to have implemented the improved risk profile procedures for this to be affective.
- Reevaluate the valuation of assets. Since the cost of repairs and labor have increased significantly along with the replacement costs values, organization should reassess the value of business assets. They should confirm that their policy limits actually reflect the cost to repair and replace their asset(s). The cost of being underinsured could be crippling to a business in the long run.
- Embed risk reduction in company culture. Making safety and wellness key tenets of the workplace can reduce workers compensation claims and also improve worker satisfaction by showing employees the organization cares about their well-being.
- Be creative. Don’t be afraid to look beyond the primary market for coverage in these volatile times. Retain an expert to help identify the biggest exposures and develop an insurance strategy to best protect against those risks.
It’s important to work with an experience insurance advisor on navigating inflation insurance pricing in challenging market conditions.
Mary Jeanne (MJ) Egleston serves as executive vice president with HUB International Northeast, a leading global insurance brokerage. She is based out of HUB’s Woodbury office.