Business insurance rates will continue to increase in 2023. The reasons vary from state to state, but they're all related to economic trends that will continue into the foreseeable future.
4 Reasons Business Insurance Rates Continue to Increase
There's no way around it: if you own or operate a business, your insurance costs are going up.
Here are some of the trends that are affecting business insurance rates and why they will influence them for years to come.
#1 Ongoing Supply Chain Challenges
Business insurance rates are on the rise in the wake of ongoing supply chain challenges.
The cost of insuring businesses against damage and disruption has increased as a result of the recent global economic crisis, which has led to a scarcity of raw materials and labor. The resulting supply chain disruption is driving up costs for companies across industries, but especially in manufacturing.
The increase in business insurance rates is not limited to the United States; it is a worldwide phenomenon. In fact, according to new research from Willis Towers Watson, global business insurance rates have increased by an average of 4 percent since 2016. In the United States alone, this translates into an increase of $1.5 billion per year for corporations with more than $500 million in revenue.
#2 The Russian-Ukrainian Conflict
Although this may be a bit surprising, business insurance rates are increasing in part due to the Russia/Ukraine conflict.
The Russia/Ukraine conflict has had a significant impact on the business insurance industry. The Russian ruble has plummeted, and the Ukrainian hryvnia has fallen sharply against the dollar, making it harder for businesses to get loans. This has led to a decline in GDP, which in turn has caused companies to cut back on their spending. As a result, businesses have been forced to raise prices or reduce hours in order to maintain their profit margins.
This affects business insurance rates as well. As companies are forced to raise prices and reduce hours, they also need more coverage than they did before. This means that they need more liability coverage because they will be liable for any injury or damage done by their employees while working on the premises or with their equipment. It also means that they will need more property coverage if there is an accident at work that results in damage to company property such as computers or vehicles.
Business owners should consider increasing their coverage now so that they don't have any surprises later when rates go up even more due to rising inflation rates from higher oil prices combined with lower GDP growth rates due to less consumer spending power from higher prices across all sectors due to increased tariffs.
Inflation is the rate of increase in the general level of prices of goods and services. Inflation can be caused by an increase in the money supply, which increases the demand for goods and services, or by a change in supply and demand. Inflation is measured as a percentage increase over time, so if inflation is 5% (the general rate) it means that costs are going up by 5% every year.
An inflationary environment makes insurance companies more nervous about covering your business because they know you're going to need more coverage next year—and each year after that—to cover damages from natural disasters and lawsuits as well as other losses.
Inflation has also caused wages (and therefore salaries) to rise, which means that employees are able to spend more money on goods and services. This leads people to demand higher prices from businesses—in other words, businesses need to charge more money for their goods and services in order to stay profitable. The same is true for insurance companies: they need to charge more money for their services because their costs are increasing due to inflation.
#4 Volatile Interest Rate Environment
The interest rate environment is a major component of commercial insurance pricing, and it can impact business owners in many ways. For example, increasing interest rates tend to increase the likelihood of filing claims against businesses because they provide more money than usual for those who have been injured or damaged by another party's negligence.
In addition, increasing interest rates can also cause businesses to become less profitable because they have less money available for investment purposes. This means that their ability to provide coverage for their employees may be reduced, which could cause people to lose their jobs or suffer from other financial problems.
Business Insurance in 2023
Business insurance rates are on the rise due to a multitude of factors, including the four above. Businesses must adapt their coverage to stay protected, as these trends continue into the foreseeable future.
If you need assistance searching for the best business insurance policy for your company, we are here to help. Contact Fiorentino Insurance Group today to speak to
a licensed agent and be on your way to having peace of mind knowing you’re your business is fully covered should an incident occur.