As real estate businesses and those across all industries continue their journey to recovery from the ongoing and lasting effects of the pandemic, a focus on organizational resilience has never been more important. The continuing effects of COVID-19 have also had a major impact on insurance. Add catastrophic losses from hurricanes, hailstorms and wildfires to the mix and you’ve got a pile of costly claims.
In addition, surging inflation, supply chain delays and the rising cost of goods have in- creased the cost of doing business nationwide. Replacement costs for buildings and vehicles have jumped 27% since the end of 2021, labor costs have risen more than 5% and extended supply chain delays have increased logistic costs for business by more than 20%, according to Moody’s Investor Service. These challenges, coupled with rampant inflation, said Pew Research Center, have insurers raising premiums and reducing limits to cope with the rising cost of claims.
The current state of the insurance market requires businesses to present themselves in the best possible light to enable their brokers to present the best-case scenario to insurers. In partnership with your insurance advisor, demonstrate to the marketplace why they should want your business (i.e., a good loss history and corrective measures taken to prevent similar losses from reoccurring, proactive risk management/transfer practices, proper safety protocols and property upgrades).
As the global economy grapples with a potential recession, organizations need to prepare for potential premium hikes and take steps to make their businesses a more attractive risk. Organizations should:
• Improve their properties’ risk profile. With shrinking capacity in many property insurance markets around the country; businesses need to stand out as “best in class” risks. Incorporate mitigation tools, such as installing water leakage alarms, improving security monitoring and scheduling regular maintenance of higher-risk equipment, such as HVAC systems and fire sprinkler systems.
• Prioritize exposures. In these economic conditions, organizations will likely need to take on more risk. Reassess and evaluate deductibles, limits and insurance program structures to identify areas where the company can maximize its bang for the buck. This may include raising deductibles or self-insured retentions, or decreasing limits to reduce premiums.
• Reevaluate the valuation of assets. With repairs and replacement costs up significantly over the past few years, reassessing the value of your business assets is crucial. Make sure policy limits reflect anticipated replacement and labor costs.
• Embed risk reduction in company culture. Making safety and wellness key tenets of the workplace can reduce workers’ compensation claims and improve worker satisfaction by showing employees that the organization cares about their well-being.
In the current environment, underwriters review submissions, questioning and reviewing every detail of information on the application. Together with your insurance broker, work toward a professional submission that highlights the strengths of your risk management efforts. Completing an insurance review and gathering information takes time. Here is what you can do to improve your situation in this hard market:
• Providing your updated information to your broker early in the renewal process will let you obtain your terms sooner and address options with your broker.
• Insurance underwriters have limited time to go back and forth with your broker requesting missing information — assist by ensuring your file is complete.
• Improve maintenance, implement risk services recommendations and evaluate operations — underwriters favor and value clients that take care of their business.
• Be creative. Don’t be afraid to look beyond the primary market for coverage in these volatile times. Retain an expert to help identify the biggest exposures and develop an insurance strategy to best protect against those risks.
It’s important to work with an experienced insurance advisor on navigating inflation insurance pricing in challenging market conditions.
Frank DeLucia
Hub International Northeast
Woodbury, NY
frank.delucia@hubinternational.com
(212 )338-2395
