In the fourth quarter of 2017, insurance pricing began a steady climb. At the same time, rates for employees began to decline due to the decline in workers comp claims. Accordingly, auto insurance rates for commercial auto insurance also increased at the same time. It didn't stop there; the trend would continue into the first quarter of 2018.
To further complicate the question, the North American commercial property rates for insurance are also anticipated to rise by as much as 25% during 2018. There were many catastrophic events during 2018 that are being blamed for this, including hurricane Harvey.
In recent years, the insurance market was soft and has headed toward a catastrophic chain of events. Again, natural disasters including Hurricanes Irma, Harvey, and Maria are partially to blame. While not all properties were damaged, many were located in regions where they had the potential to be damaged and are being charged more for insurance accordingly.
As the surge of water and the wind came through, the property was heavily damaged and not all of that damage could be prevented. Insurance claims went through the roof and many companies even went under due to the cost of the claims. Businesses closed and the replacement of their equipment and even their buildings brought about an entirely new issue with the cost of premiums.
Replacement costs for things that were purchased even five years ago have often doubled or even tripled and when the insurance includes replacement costs this means that items that are being replaced will be replaced at current market value. This quickly adds up and the insurance companies often wound up losing money on their deals.
In states such as Texas and Florida, where there are more natural disasters such as hurricanes, rates were expected to rise in accordance with the potential for claims and damages. Residents who had insurance were shocked to find that these rates were rising at a rate much faster than other regions of the country. Worse, they used the insurance more frequently than other regions of the country so they had to have it regardless of the cost to their business.
As these rates increased, so did the General Liability rates which increased by as much as 1.9% in the fourth quarter alone. Rates for other business policies also increased and there were many that went up by as high as 3.9%. Even the Umbrella rates increased by 1.3% in comparison with the 1.5% that increased in the third quarter.
Businesses were left in a quandary as to what to do. Where could they cut corners to make ends meet and gain a good return on their investment? Trimming insurance costs weren't necessarily the route to go if they wanted to protect their investments. By purchasing their insurance annually, they could often shave as much as several hundred dollars off of the overall premium and thus help to protect their business.
Around the globe, insurers can anticipate a rise in rates that is likely going to only increase as the years roll by. Many insurance corporations are stating that their rates may reach double digits in a few short years following over $3 billion in catastrophic losses.
The marketplace is reacting by scrambling to buy their policies quickly and pay for a year in advance in order to circumvent the increase in premiums. As potential insurers gain a clearer sense of how much they're slated to lose should they not plan ahead, they're scrambling to make sure that they have everything that they need now, before the rates go up.
This is great for the insurance companies Procom Insurance and the businesses are at least covered for the next year. After that, there are no guarantees that they'll even be able to afford the premiums so it's important to climb on board while they can still afford it.
To further complicate the equation, the auto liability rates for commercial lines, are also anticipated to increase by as much as 3% to 8% due to higher rates of accidents and such citations as distracted driving. That, coupled with the rising cost of repairs for damaged vehicles are only driving the rates up.
The next complication is hacking. Cyber insurance, like any other online business, is still subject to hacking. This, in and of itself, sets up the need for increased security measures and encryption. That translates to a higher premium to cover those enhanced security measures and keep your personal data safe.
Even brick and mortar businesses are still subject to the issue of hacking. As this trend increases, the need for stronger security measures and more encryption will require more skills for employees and thus, higher wages. The trickle down theory is at work here and this price increase goes across the board.
As one area goes up in price, the rest must follow in an effort to secure the benefits that commercial businesses require. If the premiums don't go up, someone is going to wind up on the short end and not have coverage where they need it.
Just as in any other business, insurance rates must keep up with the times. Prices go up on products and services and insurance is no different. Due to the claims in any previous year, insurance rates are going to rise.
Due to the increase in replacement products and services, the premiums must also rise. Insuring a business for "market value" or "replacement value" means that whatever is lost, is replaced, according to the exact terms of the policy, at the current rate or market value.
This mean that it's going to cost more to replace than when it was originally purchased. If not kept in check, this can rapidly get out of hand and cost consumers, and insurance corporations even more.
Commercial insurance rates are ready to rise again this year, and likely the following years. The only way to slow this down is to use the insurance less or not at all, however, the entire reason for insurance is to protect a business so it must be in place at all times.