Why Your Insurance Rates are Going Up and What to do About it!
Insurance pricing has been on the rise for a while now, with widespread premium hikes across all types of insurance.
Why are rates up? How long will it last? And above all, what does this mean for your business?
Before we dive in, let’s quickly refresh how the insurance industry works. Insurance is a way to transfer financial risk from individuals (and businesses) into a community risk pool. Insurance buyers contribute to the pool by paying a premium. When a loss, or a claim, occurs, the insurance company dips into the pool to pay for it. Essentially, the contributions of many fund the losses of a few.
But after a few rough years, claims have surged in frequency and severity with higher payouts all-around, leading to massive losses for insurers. Why are claims increasing? Social trends, rising demands for corporate transparency, catastrophic weather events—and let’s not forget the pandemic factor. Plus, various financial crises, along with the outbreak of COVID-19, have virtually eliminated interest gains from stocks and bonds. Simply put, insurance companies are paying out more money than they can get back in premiums and investments.
To protect their existing clients and ensure they’re financially secure enough to pay for claims, insurers must be more cautious about what risks they can take on. They’re pulling back on coverage, lowering limits, and raising premiums; these conditions are known as a “hard market.” And until the insurance industry starts making money again—fewer claims, lower payouts, higher returns—rates will keep climbing upwards.
With billions of dollars in losses, the industry first started to experience a hard market in 2019, which continued well into 2020. And with no end to the pandemic in sight, it’s likely that the hard market is here to stay for the foreseeable future.
What does that mean for you?
Even the most prepared insurance buyers will have to adapt. Businesses can expect to face: higher premiums, reduced coverage, stricter underwriting criteria, and fewer options to choose from. In fact, you might’ve already noticed this during your last renewal.
At this point, you may be starting to panic. You might want to jump ship and shop around for a cheaper insurance plan. Or maybe you’re thinking about self-insuring. Why not cancel your coverage for the time being since there’s less risk with everyone at home anyway?
But there’s no need to worry—or be rash. Insurance companies are strong and well-positioned to deliver. After all, the industry is designed to help people make it through the worst of times. Even better? Your broker is already one step ahead.
Here’s how your Broker can help:
Brokers, like PROLINK, are knowledgeable advisors who will advocate for you when you need it most. We’ve already negotiated on your behalf to make sure you’re getting the best rate possible. And while the rapidly changing nature of the pandemic makes market changes difficult to predict, one thing is certain: we’re doing everything we can to accommodate your needs and make sure you’re sufficiently protected amid these extenuating circumstances.
With nearly 40 years in the industry, PROLINK has seen it all—soft markets, hard markets, and everything in between. We’ll provide you with the knowledge and expertise you need to safeguard your business, no matter what’s happening in the market.
To learn more about how insurance rates fluctuate, why, and what you can do about it, read our report: The Insurance Pendulum: What's a Hard Market?
For more comprehensive guidance, with your CAMA Account Manager, Corrine Lamb at CorinneL@prolink.insure.