How Can Business Owners Adapt to a Shifting Insurance Market?

July 30, 2021

Like many industries, the insurance market is cyclical in nature. Cycles are often characterized by periods of stable rates and readily available insurance, known as a “soft market,” and periods of rising rates and more difficult to find coverage, often referred to as a “hard market.” As a business owner and insurance buyer, it can sometimes feel as though premium prices are constantly changing. But what factors affect the insurance market and how can business owners adapt to these ebbs and flows?

Factors affecting the insurance market
The insurance market had enjoyed stable rates for nearly a decade. But gradual changes have caused premiums to start increasing and availability of policies to reduce. COVID-19 also threw a huge wrench into the mix, causing businesses to shut down and revenue to drop. Here are some common contributors to the cyclical nature of the insurance market:

  • Catastrophic losses
  • Claims costs
  • Underwriting standards
  • Investment returns
  • Reinsurance 

How can businesses adapt?
Nearly all businesses will need to make some adaptive changes when the insurance market is hardening. Premiums increase, underwriting scrutiny rises, and coverage restrictions and exclusions come into play. It can be challenging for business owners to know how to move forward. That’s why it’s critical to work closely with a trusted insurance agent to help you navigate these complex waters. Together with your agent, your business can get ahead of a challenging insurance market. Here are some ways:

  • Review your insurance program
    It’s important to ensure that your insurance policies account for your business’s greatest exposures. Work with your insurance agent to conduct a thorough review of current coverages to be sure you’re not overlooking exclusions that could open you up to unnecessary risk. 
  • Budget wisely and plan
    Unfortunately, premium increases are unavoidable in some cases. It’s important to budget accordingly and take insurance costs into account alongside your normal expenses. 
  • Know your loss history 
    Underwriters are especially critical when reviewing loss trends in a hard market. Be prepared to explain the factors contributing to specific losses and work with your agent to outline the steps taken to mitigate future ones. 
  • Increase your management efforts
    Mitigating risk makes your business more attractive to insurers. Your insurance agent can help you identify vulnerabilities and make suggestions on ways to secure more favorable quotes.
  • Choose the right insurance agent
    Your insurance agent is your business’s trusted advisor and partner. It’s important to work with someone who is knowledgeable about your industry and has established relationships with insurance carriers. 
  • Communicate, communicate, communicate
    It’s critical to keep in close contact with your insurance agent. You and your agent should have a transparent, open relationship and work together to discuss the renewal process as early as possible. This will allow your agent adequate time to find the best coverage for you and your business. 

Working with an insurance agent (and the right insurance agent, at that) is more important than ever. Business owners need an insurance partner who knows their business, has established relationships, and can offer the right advice and solutions during these challenging times. Having a creative strategy in place to proactively address risk, control losses, and manage exposures will help set you and your business up for lasting success.

Sandy Spring Insurance Corporation offers proactive services to help you manage your corporate insurance program, reduce losses, and lower insurance costs. To assess your insurance needs please schedule a free consultation, contact us at 800.954.3335 or email us at [email protected].

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Wealth and Insurance products are not FDIC insured, not guaranteed, and may lose value.

Insurance provided by Sandy Spring Insurance, an affiliate of Sandy Spring Bank.

This material is provided solely for educational purposes and is not intended to constitute tax, legal or accounting advice, or a recommendation for any particular transaction.