Managing Increasing Business Insurance Premiums: A Guide

Wondering why your insurance premiums have gone up when you haven't made a claim? There are multiple reasons why insurance premiums can rise and, fortunately, some actions you can take to manage the impact on your business.

Why business insurance premiums rise

Here are some of the common reasons why the cost of business insurance premiums may have risen.

Inflation: drives up costs and the potential costs to support business risks covered by insurance, which causes insurance premiums to increase.

Renewing insurance during inflationary conditions or when property, goods and services are increasing in cost often requires sums insured or coverage levels to increase as well, to avoid being underinsured.

Claims payouts: the accumulation of businesses in a sector or area/region suffering losses and making claims — for damage from extreme weather events, for example — may result in premium increases for property cover.

Liability claims also involve rising expenses as medical and legal costs go up, which leads to increased premiums for cover such as public and products liability and professional indemnity.

Insurance market conditions: it may seem obvious that insurers are subject to the same commercial conditions as other types of businesses: the economic climate, size of the market, availability and demand for particular cover, scale and cost of claims payouts, and the need to maintain profitability.

All these conditions may contribute to increases in premiums for insurance customer businesses.

What businesses can do to manage the pressure of rising insurance costs

Be proactive about risk management: one way to avoid steep premium costs is to minimise or mitigate risk exposures in your business. Documenting your risk management protocols to present to prospective insurers may help to contain premium costs.

Review your cover and your current needs: businesses adapt constantly to changing conditions. It's worth checking your insurance policies for classes of cover that no longer apply to your business situation. You can update your sums insured for replacement values at the same time.

Plan ahead: don't leave it too late, allow three to six months to look into risk trends like cyber crime and consider adjusting protections for risks that increase business costs in terms of scale of impact and expense — versus low-cost incidents.

Review sums insured and scope of cover for greater benefit: ask your insurance broker about the potential for customisation and flexibility in the policies you are considering. It may be possible to offset higher premiums by making changes to inclusions/add-ons in your cover.

Spread your premium payments to protect liquidity via premium funding, which is available on many insurance types, enabling you to make monthly payments rather than paying the total cost upfront.

Consider carrying some of the risk on your own balance sheet: if cash reserves allow it, you can retain part of the cost of the risk yourself. This is referred to as self-insurance or co-insurance and it may allow you to save on premiums for risks that your business can partly cover if you do need to claim.

Leverage broker expertise: as industry specialists with access to networks of insurers and knowledge of customising cover to adjust for client needs, brokers can advise and help find insurance solutions on terms that you may not be able to find on your own.

Layering indemnity limits may provide a solution: depending on the size of your business it may be possible to 'layer' insurance cover from two or more insurers to achieve the full indemnity required for your risk.

Gallagher brokers work to secure cover on optimal market terms

The factors impacting insurance premiums and market conditions are varied and also depend on each business's risk profile, claims record, approach to risk management and the broker capability, so businesses should be prepared for changes in premiums and other aspects of their insurance renewals year on year.

At Gallagher we work with a large variety of businesses, with unique risks, challenges and circumstances, including many businesses with hard to place risks. As a leader in risk management, we provide expert guidance in meeting insurer expectations through the renewal process, to access cover that achieves confidence in business risk protection solutions.

Let Gallagher be your trusted partner in navigating the evolving insurance landscape and your upcoming renewal, or consider a complimentary Gallagher business insurance risk review.

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