Surging inflation, supply chain delays and the rising cost of goods have increased 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%.1 These challenges, coupled with rampant inflation,2 have insurers raising premiums and reducing limits to cope with the rising cost of claims.

These macroeconomic forces have added to the pressures on the property insurance line. Lingering droughts and wildfires in California have driven up insurance premiums in the Golden State, and rampant litigation of homeowners’ claims in Florida has substantially reduced capacity in the Sunshine State as more insurers fall into receivership or exit the market.

Auto insurers face similar challenges, with costs to repair increasingly high-tech vehicles continuing to climb. In workers compensation, while rates remain low, organizations are paying more in payroll to attract and retain workers — which raises annual premiums. And soaring rates of cyber attacks continue to place pressure on the cyber marketplace.

5 ways to reduce risk in a volatile insurance marketplace

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:

  1. Improve their properties’ risk profile. With shrinking capacity in many property insurance markets around the country, organizations need their properties 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.
  2. 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.
  3. Reevaluate the valuation of assets. With repairs and replacement costs up significantly over the past few years, reassessing the value of the organization’s assets is crucial. Make sure policy limits reflect anticipated replacement and labor costs.
  4. Embed risk reduction in company culture. Making safety and wellness key tenets of the workplace can reduce workers compensation claims and also improve worker satisfaction by showing employees the organization cares about their well-being.
  5. 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.

Contact HUB International’s business insurance experts to learn more about navigating inflation insurance pricing in challenging market conditions.

1Insurance Journal, “Home, Commercial Rate Hikes Not Enough to Offset Construction Costs: Moody’s,” May 19, 2022.
2Pew Research Center: “In the U.S. and around the world, inflation is high and getting higher,” June 15, 2022.