We have some good news and some bad news. Let’s start with the bad: it has been a difficult year, which has created the hardest insurance market in over a decade. That means businesses and risk managers are feeling those negative effects when procuring and renewing insurance. Coverage is going down and rates are going up. You can expect higher premiums, a challenging underwriting process, increased retention, and new exclusions.
Now for the good news: many strategies exist for creating a commercial insurance program in a hard market that meets your needs without completely breaking the budget.
1. Understand Your Loss History
Know your past losses and what contributed to them. Underwriters in a hard market are more likely to scrutinize loss histories. They will expect explanations for past claims and what your company is doing to mitigate those same types of losses. Proactively understanding your vulnerabilities and putting a plan in place to decrease those risks can pay off by lessening steep rate increases—some now and more in future years.
2. Budget Appropriately
Even companies with clean loss histories will see significant rate increases. It is a seller’s market. When budgeting for insurance, double-digit increases are possible. Communicate that reality upstream so all necessary parties within the company are prepared. Risk & Insurance reports that rates are in flux. Some companies expecting a 10% increase 60 days from renewal had the rate increase to 25% just 30 days later. Ask your insurance agent what other similar companies are seeing to get an idea of how to budget.
3. Shop Early and Shop Around
Insurance negotiations take longer in a hard market. Start the process early so a coverage gap threat does not rush decision making. This is especially true for niche businesses, those with loss histories, or companies benefitting from aggressively favorable terms historically. Insurance renewals typically functioning as a “set it and forget it” process in past years will not work that way now.
As part of the renewal process, take the opportunity to shop around. Identify if more competitive rates exist with another carrier without compromising coverage. Even if your preference is to stay with your current insurer, this creates some buying power within the negotiation process. Plus, these discussions provide valuable insight into how insurers are functioning that can inform your overall risk management plan.
4. Be Transparent
Controlling rates requires managing underwriter speculation. Supply carriers with clear data on loss histories. Go a step further by discussing what steps now are in place to prevent those same losses in the future. Insurers love to hear when their risk mitigation suggestions have been implemented. Communicate the impact of those recommendations or the timeline for executing them. Finally, present the company’s strategic plans as they relate to insurance risk. Any anticipated moves that could reduce risk may help decrease rising premiums.
5. Get Personal
Start with your agent and broker. Remind them that they are your company’s advocate. They should be leveraging their relationships and fighting on your behalf to find good coverage at fair prices. They also should be honest, even when it feels unpopular, about rate increases and policy adjustments so your company can prepare financially.
Next, establish a connection with carriers. Strong relationships can help with a difficult negotiation. Create a narrative for your company and share that directly with insurers. For carriers, saying “no” in person can be more difficult than by phone or email. Face-to-face meetings also give carriers the chance to explain coverage changes and rate increases, which makes them more palatable for clients.
6. Determine a Safe Level of Risk
In soft markets, competitive rates make ample insurance coverage easy. Tough markets mark a good time to scrutinize your policies. Determine critical coverage needs and identify potential areas where you are more willing to accept risk. If the loss potential is low, now might be a good time to reduce some coverages to control premiums.
7. Find the Right Fit
Price is not everything. Simply going with the low-cost provider can create its own level of risk. There is a cost for a reputable, financially stable insurance carrier. Also, insurers with special knowledge and expertise in covering businesses like yours is valuable. The current market conditions likely will last for several years. Create a partnership that works for both sides. The goal is keeping your company safe in the best, and most affordable, way possible.
Let Lumie handle the paperwork
Keeping every certificate current is a lot to ask of any team. illumend, from myCOI, reads each certificate and endorsement against your requirements, flags what’s missing, and follows up with your third-party partners for you. You’ll see who’s covered, and who isn’t, without chasing a single email.
Want to see it in your workflow? Schedule a demo and we’ll show you how illumend fits.
