Commercial Insurance Trends for 2024

As we stand on the cusp of 2024, it’s never been more important to remain agile in the face of changing market conditions. Snellings Walters Insurance Agency (SWIA) has its finger on the pulse, with valuable insights into the trends shaping the commercial insurance market and how to navigate these changes with confidence. Join us as we delve into key themes ranging from rising rates to the ever-pressing issue of natural disasters—with guidance from our very own Principal Clay Snellings and Client Executive Blake Snellings.

Insurance rates continue to rise

Inflation impacts on commercial insurance

The surge in inflation is sending shockwaves through various economic sectors, none more so than the insurance industry.

Auto and Business Liability insurance premiums are skyrocketing, outpacing the usual Consumer Price Index (CPI). To put it in perspective, according to The Council of Insurance Agents & Brokers (CIAB), commercial auto rates increased an average of 10.4% during the second quarter of 2023 alone.  Most of these rate increases are caused by unnecessary and frivolous litigation driving up the average costs of a claim or lawsuit.  Also, the cost to repair and replace automobiles and trucks has been on the rise due to supply chain impacts that stemmed from the pandemic of 2020.

Property insurance premiums are also on the rise.  A major culprit…. inflationary influences on construction costs. In other words, when construction costs go up, property claims follow suit—causing property rates and property insurance limits to increase.

Natural disasters wreak havoc on rates

In addition to inflation issues, natural disasters have become more frequent and severe. Hurricanes, hailstorms, tornadoes, and wildfires are all driving costs up for clients, and the numbers are staggering; according to the National Ocean and Atmospheric Administration (NOAA), we experienced 24 weather and climate disasters that were each in the billion-dollar range within the first nine months of 2023 alone. These events mark the most disasters of that magnitude on record for a calendar year, totaling more than a whopping $67.1 billion in monetary losses.

Legal Climate issues impacting rates

And then there’s the issue of unnecessary and frivolous litigation. The frequency of lawsuits from what seem like minor incidents and accidents are on the rise.  10 years ago, a simple auto accident or slip and fall claim could be settled directly between the insurer and the injured party on a fair and equitable basis. The trends of attorney representation in these small incidents are driving up claims costs.  The “victim syndrome”  trend is having a negative impact on rates and premiums.

In addition, there are crime statistics challenges in urban areas causing an increase in claims frequency and severity,  that are leading insurance companies to restrict coverage for claims resulting from assault, battery, and firearms-related incidents—particularly in the apartment and hospitality industries. Liquor liability is an area of concern for the bar and restaurant industry as costs also continue to climb. While it can be challenging, SWIA emphasizes the importance of staying ahead of these risks to ensure adequate coverage.

Strategies for handling rising rates

Consider alternative solutions

Rate increases pose a challenge for businesses, but there are strategic solutions. Many are opting for higher deductibles or self-insured retentions to share the risk burden. Some brave business owners are even reducing Umbrella or Excess Liability limits; although a smart decision for many, it’s important to carefully consider the risks if you decide to go down that path. For those with low claims frequency, alternative insurance options like Captive Insurance Programs are gaining traction, rewarding those who can control and mitigate their claims.

Fight for Tort Reform in 2024

To ensure continued economic prosperity, business leaders and insurers should actively engage in their state’s legislative process, supporting industry PACs to champion pro-business agendas. By tackling the root causes of rising claims, businesses can work toward a fair and sustainable insurance market.

Reduce risk in your business

Promoting workplace safety practices also emerges as a powerful tool to combat rising insurance rates, especially in workers’ compensation and commercial auto. Companies should look at implementing weekly safety meetings and consider telematics devices to track company vehicles and monitor driving behavior. Not only does this help eliminate bad habits, but it can also help in building a defense when facing a negligence claim. Tactics will differ by industry, and your insurance consultant can help you navigate the options.

 A glimpse into the future of data analytics and predictive modeling

Our team recognizes the evolving role of data analytics, predictive modeling, and artificial intelligence (AI) in shaping the insurance market. These advanced technologies are crucial for pairing clients with the best insurance products and pricing models. By analyzing human capital, physical assets, and business processes, insurers can better understand and mitigate risks. This evolution is poised to enhance the value proposition of commercial insurance, providing tailored solutions in an ever-changing landscape, and will ultimately help business owners navigate the challenges ahead.

Long story short…

As we move toward 2024, the commercial insurance market is headed for dynamic changes. Businesses that proactively address challenges, leverage new technology, and stay engaged in legislative processes will not only navigate the evolving landscape successfully but also optimize their insurance coverage for long-term sustainability.

P.S. We love a good challenge. Contact us to see how we can help you navigate these changes and complexities with both success and ease.

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