Mid-Year Rate Report on Today’s Insurance Market: Best Practices To Improve Insurability And Reduce Risk

The volatile commercial property insurance market began 2023 in turbulence, with economic uncertainty, rising replacement costs, supply chain delays and prominent weather catastrophes in 2022 elevating rates.

Industries across the board, including hospitality, are likely to pay more for property insurance and see terms and conditions tighten, but stabilizing inflation and improved underwriting should help the market settle into a less erratic future. Below are average rate increases as of Q2 2023. Discuss your business exposures with your insurance broker to understand what to expect in advance of your next renewal.

• Hospitality, 15%-20% Increases: 

Risks with exposure to delivery or transportation of guests are seeing larger automobile rate increases. Liquor liability remains tough to place. Additional underwriting of crime scores and sub-limited coverage for assault and battery continues.

• General Liability, 2%-10% Increases: 

Carriers are deploying capacity carefully, and underwriters are requiring thorough submissions before accepting a risk in challenging classes, partly due to the persistence of nuclear verdicts but also to offset higher reinsurance costs. Risks with adverse claim history, or those with exposure to abuse and molestation or wildfire, are facing tougher renewals. Accounts with favorable loss history are experiencing moderate rate increases — and occasionally small rate reductions — based on exposures and sustainable program structures. Additional time will be necessary in all property & casualty lines to structure insurance programs and negotiate terms with carriers.

• Umbrella & Excess Liability, 5%-20% Increases:

Claims severity is the main driver for increased premiums, but new capacity is entering the market at elevated prices. Insureds with fleets above 300 units will be more difficult to place. Insureds may find more competition in their lead layer if the program is coupled with primary casualty, since carriers are seeking growth, particularly in workers’ compensation. Conversely, there is increased competition for excess layers above $25M due to new capacity.

• Commercial Property, 10%-25%+ Increases:

The property market is the most volatile experienced in two decades. Replacement cost valuations remain a focal point irrespective of occupancy or geography, and insurers are pushing for elevated valuations. Appraisals or a narrative on the statement of values could be helpful when negotiating renewal terms. Insureds are seeing fewer blanketed limit options. In areas subject to catastrophes, the number of standard markets is exceedingly rare, with limits only offered for best-in-class properties with superior construction.

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Manage your risk to improve attractiveness to insurers

While finding insurance for commercial properties will remain difficult, we expect market instability will level off as 2023 progresses. But to improve insurability and reduce risk immediately, we recommend property owners adopt several best practices, including the following:

• Start renewals as early as possible
  For a traditional renewal, plan to start the process 120 to 150 days out. Be sure to provide carriers with detailed information on recent upgrades to electrical, plumbing and roofs.
• Improve your risk management
  Consider technological upgrades to reduce exposures, such as water sensors, sump pumps, electrical backups and outdoor property improvements to reduce damage from wildfires, erosion and flooding. Completing a business insurance worksheet may provide a better picture of exposures and how they can be mitigated. Provide insurers with data that shows your properties are best-in-class risks and deserving of better terms and rates.
• Develop evacuation plans for catastrophes
  Insurers want to know that there’s a plan for dealing with a catastrophic event. You need plans for evacuating personnel, removing equipment and securing buildings in case of an approaching hurricane, windstorm, wildfire or possible flooding.
• Take a layered approach to security
  Start with physical security such as fencing, signage, secured gates and doors, access control and security personnel. Then layer on technologies to further improve security, such as motion detectors, sensors and video surveillance.
• Check your property valuations
  With inflation and rising construction costs, it’s crucial for commercial property owners to have enough insurance to cover rebuilding. Also, it’s imperative that you understand policies’ full terms and conditions — be aware of any loss provision limitations or exclusions that could lead to losses
• Work in partnership with your broker
  Always consult your insurance broker before purchasing a commercial building or building a new one, even in the concept development phase. It’s essential to understand the risks and to leverage risk advisors’ experience to identify exposures and develop risk mitigation plans. Your broker can show how to make your properties more attractive during both the construction phase and for the lifetime of the asset and find the right insurance with the best possible terms and price.

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For more information on additional lines of coverage, please download the full HUB Outlook Mid-Year Rate Report now.