Rising insurance rates call for closer relationships with providers

Between inflation, supply chain issues, catastrophic weather event and more, a perfect storm is hovering over commercial insurance rates. According to MarketScout, the composite rate for US commercial insurance rates rose 5.1% in the fourth quarter of 2022 and the year closed with overall commercial rate increases for the sixth straight year.

Everything is going up.

“Everything is going up,” said Gordon Quinton, president of Rochester-based Quinton Insurance, which he founded in 1996. “Inflation has reared its ugly head all over the place.”

Quinton is seeing notably higher rates in commercial property and auto insurance, where he points to supply chain issues as a major contributing factor to increasing rates. Continuing an upward trend, US commercial auto rates rose 7% in the fourth quarter of 2022, according to MarketScout.

“If you have a company vehicle and it gets into an accident the parts are taking longer to get and are also more expensive to get, so auto rates are going up,” he said.

Quinton sees clients taking on more risk by increasing their deductibles. The good news is, there are ways commercial clients can chip away at the increasing costs. For example, they can offer defensive driving classes for employees that can lower auto insurance rates slightly and earn a drug-free workplace certification for credits on workers’ compensation insurance.

“They are little things, but they can add up,” Quinton said. “Hopefully in the next couple of years, inflation will drop and deductibles can come back down.”

Double-digit increases in commercial auto.

Brian Allen, a commercial insurance consultant with Walsh Duffield Companies, Inc., a fifth-generation family-owned insurance agency with locations in Buffalo, Medina and Rochester, also sees some double-digit increases in commercial auto insurance policies at renewal.

He attributes these increases in part to large nuclear verdict claims (damage awards that generally surpass $10 million) and automobile repairs taking much longer due to chip shortages and other supply chain issues.

Allen also sees property policies increase due to economic inflation, supply chain issues, and the length it’s taking to repair and rebuild properties. Per MarketScout, US commercial property policies were up 9.3% in the fourth quarter of 2022.

Originally an elementary school teacher, Allen has worked in insurance for almost eight years and enjoys educating his clients about the commercial insurance marketplace. He has many tips for navigating policies and renewals, including ensuring that the risk profile an agent is showing a carrier reflects the company accurately. This comes down to good communication between the client and the agent.

“Look for a partner in an insurance company and build a strategic relationship with them,” Allen said. “Insurance should not just be about paying a premium.”

In choosing the right commercial insurance agency or agent, Allen recommends that potential clients ask seek referrals from other clients and ask questions, such as:

• What is the background of the agency and the agent?
• Which insurance companies do they represent?
• What services will they be offering outside of simply placing the insurance?
• Is there a dedicated service and claims management team ready to assist?
• What is their approach to marketing and their renewal strategies?

Cyber increasing but leveling out.

Increases in commercial auto insurance rates are also top of mind for Gregory C. Knicley, senior vice president, of Tompkins Insurance Agencies, Inc., which was founded in 1875 and which provides a full range of personal and commercial insurance and employee benefits products and services across New York and Pennsylvania.

“The cost of vehicles has increased and so has the cost to replace vehicles,” Knicley said. “Without the availability of vehicles and parts, there can be delays in claims. The industry is forecasting it will take a couple of years before this starts to level out.”

Knicley also sees continued increased rates with cyber insurance, but, on a positive note says the increases seem to be leveling out slightly, which is reflected in national data. Cyber insurance led the commercial insurance rate increases in the fourth quarter of 2022 at 20%, but MarketScout also reported cyber rates “did show a trend toward slight moderation.”

Property also continues to be a challenge, Knicley said, in part due to a tightening of the labor market that is causing repairs and rebuilds to take longer, which drives up rates. Inflation is also taking its toll on property rates due to the increased costs of everything needed to rebuild after a catastrophic event – from diesel fuel to construction materials.

Knicley has worked in the commercial insurance space for three decades and hasn’t seen a hardening of the market like this in over twenty years. However, he is optimistic and has tips for business owners to help navigate this storm, including creating a partnership with an insurance agent and working together to manage risk upfront.

“Insurance shouldn’t be a once-a-year event,” he said. “Clients should have a continuous open dialogue with their agent throughout the year.”

He also notes that most commercial insurance agencies use the same carriers, so it’s not necessarily about choosing an agent based on carriers, but on fit.

“Generally speaking there is a good [insurance] home for everyone,” Knicley said.

Caurie Putnam is a Rochester-area freelance writer.