Market Conditions and the Impact on Business Insurance

February 23 2023

Categories: P&C Solutions

Market Conditions and the Impact on Business Insurance

Inflation has affected nearly every aspect of running a business. 

Costs of goods and services have risen sharply and rapidly.  The overall consumer price index peaked at a 40-year high of 9.1% in 2022, while core inflation is at its highest since 1982.

Let's take a look at how how this and other factors impact your insurance premium.


Several factors contributing to premium for commercial insurance:

  • Property Replacement Costs
    • 55% increase in the cost of structural steel
    • 35% increase in the price of lumber
    • Material shortages and supply chain disruptions
    • Skilled labor shortage
    • Higher rebuilding costs and longer delays may trigger an increase in business interruption losses
  • Third Party Litigation - the business of litigation
    • Due to high ROI, venture capital dollars are being invested, growing the business of litigation
    • Driving the cost of claims up by 35% 
    • Payment to injured parties has gone down by 21%
  • Severe Weather
    • Hurricanes, floods, wildfires, tornadoes, winter storms frequency and severity
    • Total insured losses globally in 2022 were estimated at $140 billion due to severe weather
  • Reinsurance
    • A contract where an entity (reinsurer) shares a portion of risk with the insurance carrier in return for a portion of the premium
    • Helps spread risk to avoid an unmanageable financial strain on a single entity
    • Property catastrophe reinsurance has had the most significant losses.  Capacity (availability) has been restricted and pricing has increased over 37%, the largest increase since 1992
  • Auto Accident Frequency/Severity
    • Increased risk of litigation
    • More expensive to repair or replace damaged vehicles
    • Increased traffic congestion
    • Unsafe driving behaviors

While most of these factors cannot be controlled, there are several proactive steps that can be taken to minimize your risk, including:

  • Update property valuations to avoid underinsuring
  • Maintain a business continuity plan in case a catastrophe strikes
  • Evaluate business income limit to account for longer recovery timelines
  • Incorporate safety fundamentals throughout your workplace
  • Maintain strong hiring standards and training programs to reduce employee injury

The best method to manage your risk and insurance program is to have a discussion with your insurance advisor who will help anticipate what's on the horizon and the steps you should take to protect your business, reputation, and bottom line.

Don't have clear advisement?
Contact Koppinger & Associates
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