Navigating Inflation’s Impact on Commercial Insurance.

August 3, 2023

In an era marked by economic uncertainties and fluctuating commercial markets, it is imperative for business owners and key leaders to stay informed about the ever-changing insurance trends. This webinar aims to equip attendees with invaluable insights into the challenges posed by inflation and the role independent agents play in mitigating its impact.

Our webinar, presented by Jason Bukowski, partner at Shepherd Insurance, outlines how inflation is impacting the commercial insurance market and how our team can help you navigate the challenges.

 

Watch the Webinar Here:

 

A Narrowing Commercial Insurance Market.

 

A narrowing commercial insurance marketplace indicates a tightening or increased stringency in the insurance market conditions, leading to several significant changes. This type of market leads to several significant changes, such as:  

  • Rate Increases – Commercial property premiums are up 20% at the start of 2023.
  • Capacity Restrictions – Seeing a narrowing of the marketplace as it relates to the number of carriers interested in TIV’s (Tota Insurance Value) over $10 million.
  • Changes to Terms and Conditions – Carriers are adding in carve-outs for things like wind and hail.
  • Carrier Underwriting Appetite Changes – More attention is being paid to alarm systems, sprinkler systems, cameras, the last time ISO was inspected, etc.

 

Factors Driving Insurance Costs.

 

The commercial property insurance space has progressively hardened in recent years, evidenced by ongoing rate increases and other difficult market conditions. This is largely due to several cost-driving trends impacting the segment. As such, it’s important for businesses to understand the primary reasons behind rising coverage expenses. Here are seven factors currently affecting commercial property insurance costs:

  1. Catastrophe Losses – Natural disasters often cause severe losses, and the rising frequency and severity of these catastrophes have continued to pose concerns.
  2. Inflation Issues – Inflation is prevalent across all lines of commercial insurance. It was reported that the consumer price index (CPI) reached a 40-year high in 2022. The CPI has cooled, but it’s still elevated, increasing the cost of building materials and repair expenses.
  3. Supply Chain Disruptions – Businesses have resumed operations and increased production levels following the pandemic. However, demand for certain materials continues to outweigh inventory. Rising fuel and energy costs, an ongoing shortage of workers and drivers, and other factors have slowed the movement of several high-demand goods.
  4. Labor Shortages – Employers have increased wages to help minimize labor shortages. Despite the salaries, the Associated General Contractors of America reported that 9 out of 10 contractors are still searching for skilled employees, causing project delays. These labor challenges have made construction projects increasingly expensive and taking longer to complete, driving up associated commercial property insurance costs.
  5. Property Replacement – Considering all factors, buildings, structures, and contents are becoming more expensive to replace following large-scale losses. According to BLS data, structural steel costs have risen by 55%, and lumber prices have jumped by 35%. Rising replacement expenses will likely follow as material and labor challenges persist, contributing to elevated commercial property costs.
  6. Underinsurance Concerns – Underinsurance has become a growing concern due to heightened building and structural repair and replacement expenses. Specifically, businesses that fail to consider inflation, leaving them with inadequate protection and significant out-of-pocket expenses following various losses.
  7. Reinsurance Challenge – The latest natural disaster and inflation trends have proven difficult to navigate for commercial property reinsurance, contributing to several coverage challenges. In particular, reinsurers have grown selective in how much risk they are willing to take. Some reinsurers have begun limiting their capacity for these exposures or eliminating capacity, all while rates continue to surge.

 

The Benefit of an Independent Agent.

 

Shepherd represents over 100 of the top financially secure carriers. As an independent agency, we work for you and present the top option(s) based on your needs. Services we offer:

  • Unbiased advice tailored to your needs  
  • Access to multiple carriers  
  • Advocacy and claims assistance   
  • Customized coverage   
  • Ongoing support and policy reviews   
  • One-stop-shop   
  • Long-term relationship    

 

Make Sure You Have the Right Commercial Insurance Coverage.

 

It is crucial to work with your independent agent when determining the right coverage for your business. Insurance carriers are constantly innovating and using feedback from their agents to help create the best insurance policies possible for you. Does your current agent do an annual policy review with you to help assess gaps they might find in your coverage? As an independent agent, Shepherd Insurance can give you unbiased advice and recommendations such as:

  • Conducting annual policy reviews with you.
  • Understanding coinsurance vs. agreed value and explaining it to you.
  • Keeping you up-to-date on loss control.
  • Advocating on your behalf with the underwriter.

Working with Shepherd Insurance.

 

By understanding the importance of insurance coverage and making informed decisions, businesses can protect themselves from the unexpected and ensure a stable future. Insurance is not a one-size-fits-all solution, so it’s crucial to assess your needs, explore your options, and seek guidance from your local trusted agency, Shepherd Insurance. Our ability to work with multiple insurance carriers offers clients the opportunity to compare policies and secure the best coverage at competitive rates. Whether it’s property, general liability, cyber, or any other type of insurance, Shepherd Insurance is the trusted partner that helps navigate the complex world of insurance and provides tailored solutions to protect what matters most.  

Interested in More Information?

 

If you found this information helpful and are interested in how Shepherd Insurance can help with your insurance needs, contact us or visit our webinar series channel for additional recordings and upcoming events.