So, what’s driving the increase? Here are the main reasons behind the rising premiums in today’s commercial insurance market:
1. More Frequent and Costly Claims
Across the board, insurance companies are paying out more in claims than ever before. Whether it’s due to severe weather events, property losses, cyberattacks, or legal liability, the number and cost of claims have climbed. That leads insurers to raise premiums to keep up with losses.
Example: One fire or flood can shut down a business for months and cost hundreds of thousands of dollars. That risk is now baked into the price of coverage.
2. Inflation and Rising Replacement Costs
The cost of rebuilding a property, replacing damaged equipment, or covering employee injuries has gone up significantly. Construction materials, labor, and medical expenses have all surged. As those costs rise, so does the amount insurers need to pay when claims happen leading to higher premiums.
3. Increased Cyber Risk
Cybercrime is now one of the top threats facing businesses of all sizes. As attacks become more sophisticated and frequent, cyber insurance claims have skyrocketed. Even if you’re not buying cyber coverage, the ripple effect is felt across the industry, pushing up premiums for everyone.
4. Litigation Trends and Larger Lawsuits
We’re living in a more litigious world. Jury awards and settlements are increasing, especially in liability cases. This “social inflation” is causing insurers to pay more per claim especially in industries like construction, healthcare, and transportation.
Bottom line: Higher legal costs mean higher insurance premiums.
5. Reinsurance Costs Are Climbing
Insurers don’t carry all the risk themselves they buy insurance too, called reinsurance. When reinsurers raise their prices due to global risks (like wildfires, hurricanes, or pandemics), primary insurers pass those increases down to businesses through higher premiums.
What Can You Do About It?
While you can’t control the insurance market, you can take steps to manage your risk and potentially offset premium increases:
- Work with an experienced agent who can shop multiple carriers and find the right fit.
- Review your policies annually to make sure you’re not over- or under-insured.
- Invest in risk management to reduce the chance of claims and improve your insurability.
- Bundle coverage where appropriate for better pricing.
Premium increases aren’t ideal, but they’re part of a larger trend in the insurance landscape. The key is being proactive, informed, and working with someone who knows how to navigate the current market.
Want help reviewing your commercial insurance plan? We’ll walk you through your options and help you make the smartest decisions for your business.