Market Trends and the Effects on Insurance Premiums
Since 2019, many variables in the market have reshaped the insurance industry. Industry experts predict that the commercial insurance sector will experience trends like 2022. Also, there will be new trends that result in increased business costs.
But what does this have to do with my insurance premium prices rising?
As we all know, the economy has experienced significant inflation this past year. That caused a sharp increase in insurance costs. There are four main market developments that will affect your insurance premiums in 2023.
The Supply Chain:
Companies rely on a global supply chain that is still recovering from the impacts of COVID-19. This means that disruptions with shipping delays, raw materials, and labor shortages will impact operations. In addition, many consumers will experience this increased expense when insuring their property.
Insurance aims to make the insured whole after a loss. Decreased materials and increased costs make property insurance higher than in previous years. While many businesses have resumed normal operations, consumer demand continues to outweigh inventory. When supply is down, and demand is up, prices face an increase.
We can better explain this through an example. Let’s say your building suffers an accident and is a complete loss. Your insurance’s job is to make you whole again, which would mean rebuilding. But how do labor shortages affect this process? In the event of a loss, the time it takes to rebuild a building can cost double the amount because of the lack of labor. If the demand for labor is high, but staffing is limited, you and your insurance will pay more.
In the past couple of years, the U.S. has been facing extreme temperatures, wildfires, flooding, and severe thunderstorms. Weather experts report that these weather patterns are the new standard. The frequency and severity of these weather events have more than doubled in the past three years. Each event exceeds a billion dollars paid out by carriers, resulting in higher insurance premiums.
Unfortunately, the Ukraine conflict will continue to affect the United States. We will see an increase in the price of several commodities. These commodities include fertilizers, food products, and oil and gas. This is also tied back to the supply chain. Limited access to these resources when demand is high will cause a price surge.
Are there any other factors to worry about?
There are many factors that weren’t listed above. Below is a list of other factors that may affect the price of your insurance premium:
- The type of coverage you’re seeking
- The size of your business
- The industry you’re operating in
- The location of your business
- Your claims history
- Your current risk of management practices
Is there something I can do?
The market is undergoing many changes. Give one of our agents at SOGO Insurance a call to better understand how these trends affect your policy. Our agents can help you find ways to mitigate risk and lower your insurance premiums. Our knowledgeable agents can provide a market analysis to further assist you. Our agents can also remarket your current account to ensure you receive the best rate and coverage.