With gas prices at all-time highs and talks of a pending recession, we all could use some good news these days. The reality is, managing personal, commercial, and financial risk in 2022 certainly presents its challenges. While the insurance industry is not immune to this inflationary environment, the following help may prepare you for what’s ahead and help mitigate the impact inflation has on your future premiums.
In 2022, the insurance industry is deep into “Hard Market” territory, which means conservative underwriting, fewer options, and ultimately higher premiums. The reasons for this are many; Catastrophic wildfires, hurricanes, the possible failure of Florida’s homeowners’ market, civil unrest, increases in sexual harassment litigation, and rampant cybercrime are among a few… Despite popular belief, the insurance industry is in some serious distress! The good news is, with the right tools and proactive action, you can alleviate some of this pain. After all, no one should pay more than they need to for insurance.
Commercial Auto and Property Insurance premiums continue to rise
Nationwide Insurance Company recently completed a 4-year study on the impact of dash cams in commercial vehicles and the results are compelling: Businesses that use dash cams saw an 81% DECREASE in “at fault” accidents and a significant decrease in the severity of claims. Why?
1. Dash Cams accelerate the litigation and claims process. If it’s caught on camera, it’s clear who’s at fault. This eliminates the need for costly arbitration and reduces fraud in the system.
2. Employees know they are being watched by their employer, which tends to stop them from checking Facebook and Instagram or texting while driving the company vehicle.
The conclusion? Dash Cams are an inexpensive and effective way to improve on the safety and long-term cost reduction of your fleet. In my eyes, this is something every business owner should consider, and with Personal and Commercial Auto rates having increased nearly 40% in the last 5 years, you will be glad you did!
Next, let’s discuss Property Insurance:
The cost of construction materials like lumber, copper wiring, drywall, and paint have significantly increased in the last 2 years, not to mention labor shortages resulting in increased labor costs. With that said, when was the last time you looked at your home or building insurance policy? If you haven’t, I am willing to bet you’re underinsured. In fact, a recent CoreLogic study revealed that 80% of homes affected by wildfires in 2020 and 2021 were severely underinsured, in some cases by more than 50%! The cost to rebuild has nearly doubled in the last 5 years, and since most people automatically renew year after year, they forget to update their insurance policies. Remember, the insurance carrier has little incentive to offer you more coverage. If they can contractually pay you less, they will!
So how do you know if your building or home is underinsured? Ask your agent for a Replacement Cost Report on your building to make sure your limits are sufficient.
The costs to rebuild will vary by construction type, location, and quality of materials used, so make sure to review this carefully. Commercial buildings can get as low as $150/sq ft, whereas some single-family homes can reach over $500-600/sq ft!
Ways to lower your building insurance costs
Install an automatic gas shutoff valve and leak detection on your water main. Doing routine updates and properly maintaining the property goes a long way. Let your agent know when you install a new roof, and upgrade the electrical, plumbing or HVAC. If you own a commercial building with sprinklers, having the annual and 5 years sprinkler tests done regularly, should net a significant discount with your insurance carrier and qualify you for broader coverage such as “Earthquake Sprinkler Leakage”, or EQSL. Having updates to your building can mean you qualify for preferred insurance programs which tend to have more robust coverage and consistently lower insurance premiums. While these are short term investments in your property, they reap long term gains which can cost you a lot less in the end.
To learn more insurance and business tips, follow me on LinkedIn! If you or someone you know would like a second opinion on their insurance program, feel free to reach out to me via phone, email, or LinkedIn for a complimentary Gap Analysis and Benchmark review.
Justin Di Bene
Vice President of Knauf Maxwell Insurance
Foundation Risk Partners
***Knauf Maxwell Insurance provides all lines of coverage for small to middle market businesses for every industry class, including General Liability, Professional Liability/E&O, Cyber, EPLI, Auto, Property, Workers Compensation, Group Benefits, Personal Insurance, and more***