Economic trends have wide-reaching implications, including within the insurance market. For businesses of all sizes and sectors, this is apparent in how recent inflation and rising building costs have affected their business insurance premiums. Fortunately, by understanding this pattern and its causes, organizations may be better equipped to manage the situation and absorb the financial ramifications.
Why Are Business Insurance Costs Rising?
Significant events across the United States and worldwide can all have lasting implications for your business’s insurance rates. Much of the current business insurance market has been shaped by rising building costs, which can be traced back to several recent events, including the COVID-19 pandemic.
In addition to the pandemic, various other events, such as the blockage of the Suez Canal, have an adverse impact on supply chains and the availability of building materials. In addition, the recent labor market shortage has further exacerbated the situation and led to increased delays. With all of the factors contributing to rising construction costs, business insurance policies have been impacted in the following ways:
- Construction delays have prolonged post-loss recovery, resulting in more businesses being at risk of exceeding their coverage limits.
- Rising prices may affect the replacement costs of structures, equipment and contents, leading to businesses being underinsured.
- Extended recovery times could lead to periods of indemnity expiring on business income insurance policies, meaning policyholders could lose coverage for continuing losses.
- Given such potential complications, many businesses may face rising premiums to ensure their coverage remains sufficient.
How to Manage the Situation
The worldwide trends affecting the business insurance market are not going to disappear any time soon. With that in mind, your organization must consider how it can proactively manage its future. Consider the following steps:
- Have early conversations. Initiating a proactive dialogue well ahead of insurance policy renewals may allow your agent and business to explore more coverage options and find optimal solutions.
- Reassess your coverage. Given current market trends, it may be prudent to revisit business insurance policies. Making any necessary adjustments can help your company ensure it has adequate coverage and is not penalized unnecessarily by co-insurance clauses.
- Review replacement costs—Your business should take time to reevaluate its estimated replacement costs for crucial properties, such as structures, tools and equipment.
- Create backup plans—If a delay would significantly hinder your business in accessing certain resources or materials, it’s necessary to have auxiliary suppliers in place should your initial source for supplies prove incapable of fulfilling your needs.
We’re Here to Help
Having served Riverhead and Long Island since 1939, the agents at Lupton & Luce Insurance are well-equipped to help your business assess its current insurance policies and make any necessary adjustments. We will work with you to reevaluate your coverage needs against nationwide and global trends to ensure you remain adequately protected.
Visit our website or call 631-727-4114 to learn more.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.