The cost of business insurance, like almost everything else, is going up — with one interesting exception.

But there are ways for business leaders to make sure they have the critical coverage they need at the best price. Two key strategies, Alabama experts say, are to first shop around, then work closely with their chosen agent.

“This collaboration ensures that the business is adequately covered without overpaying for unnecessary coverage,” says Josh McRight, principal at Rocket City Insurance Group in Huntsville.

Cost is always a consideration, but McRight says, “it’s vital to prioritize adequate coverage to avoid being underinsured” — which can lead to potentially catastrophic results.

“Inadequate insurance can lead to significant financial losses or even the closure of the business in the event of a major claim,” he adds.

Jennifer Hill, director of operations and vice president at Harmon Dennis Bradshaw Inc. in Montgomery, echoes McRight. Businesses should consider their agents as part of the team and keep them well-informed about operational changes.

“This will enable their agent to bring competitive and innovative solutions to solve the insured’s largest exposures,” she says.

“A trusted insurance agent with experience in hard-to-place risks and strong relationships with carriers can market your risk and present the best options for your business,” agrees Grantland Rice IV, president and chief administrative officer at CAC Group (formerly Cobbs Allen) in Birmingham. That agency specializes in custom coverage.

“Start the conversation about insurance with your agent as early as possible,” Rice advises. “More time allows for better insurance outcomes.”

Loren Traylor Gibson, director of program development for the Alabama Self-Insured Worker’s Compensation Fund in Birmingham, also suggests that businesses work with independent agents “who can evaluate their needs to determine what coverages they need and what level they need it at.

“Every business is different,” adds Gibson. “In the insurance business there isn’t one set price because it’s all based on risk.”

Rice, at CAC, says the type of coverage a business needs depends on its own risk factors. Types include general liability, property, workers comp, professional, errors and omissions, product liability, commercial auto, business interruption, cyber, directors and officers and employment practices liability.

“Our agents conduct a comprehensive risk assessment, client consultation and review of current coverage,” says Rice. “We perform industry and financial analysis to offer bespoke solutions and ensure stakeholders understand the recommended coverages and options.”

Insurability depends on factors like the type of business, the overall industry, claims history, risk management practices, location, credit history and nature of operations.

Hill agrees that the type of insurance a business needs depends on several factors, including their assets and operations.

“For instance, if a business owns property, they’d need property insurance or inland marine insurance or both depending on the type of property it is,” Hill says. “They’d need business interruption insurance to protect them in the event of damage to their property that would cause them to be unable to resume operations for a while.”

A business may need boiler and machinery insurance, crime insurance and more.

“General liability insurance is the most commonly needed insurance for businesses, and if a company owns, borrows, leases or hires autos or has employees that use their automobiles on company business, auto insurance is also needed,” Hill adds.

Excess liability can protect against larger claim awards.

“Employment practices liability insurance, directors and officers liability insurance, cyber and fiduciary liability insurance are also pretty standard,” says Hill.

Depending on the business, “professional liability insurance may be needed” as well.

“HDB’s risk advisors complete a thorough risk assessment to determine the insurance coverages needed for a business and our insurance programs are customized to meet the needs of our clients,” Hill says.

Agents agree that business coverage is widely available — but not necessarily for the price companies want to pay.

In risky situations, agents can generally find a solution but “it may not always be easy or cost effective,” Rice says.

Although property insurance premiums have escalated rapidly since 2019, Hill says they “are widely speculated to have stabilized and we’ve seen some relief already for pricing on the lower hazard risks in 2024.”

But Hill says automobile, general liability and professional liability premiums have been continuing to escalate and “haven’t stabilized quite yet.”

“The business sector has faced challenges similar to those in personal insurance, including economic uncertainty, natural disasters, cybersecurity threats and legal and regulatory changes,” says McRight.

Newer businesses tend to be more price sensitive, he notes, “often requesting remarketing to mitigate premium increases.”

An independent agency like Rocket City Insurance Group has “the flexibility to tailor coverage to meet specific needs by partnering with multiple carriers,” McRight says.

As with most things, cheaper isn’t necessarily better.

“We frequently encounter underinsured accounts, and in the event of a claim, the perceived savings can end up costing businesses significantly — potentially even leading to their closure,” McRight says.

According to a Federal Government Office of Financial Research article from December 2023, reasons for industry rate increases include high inflation, exposure in higher-risk areas and severe weather “resulting in large cumulative losses.”

CAC’s market report for the second quarter of 2024 forecasts rising costs in auto liability (as much as 15%), general liability, property and umbrella coverage (partly due to so-called “nuclear verdicts”). Directors and officers insurance, however, is forecast to come down. So is cyber, partly due to increased regulatory claims activity.

In its analysis of the market, CAC found that “geopolitical and regional conflicts, increased frequency of secondary peril natural disasters, and both economic and social inflation continue to plague the market.”

Total premium growth is forecast to develop at an average rate of 2.2% annually during 2024 and 2025, according to the risk management company Swiss Re.

While cost is typically the foremost consideration with business insurance, Rice emphasizes that “the real focus should be on securing the right coverage at the best available price.”

“Every business is different, and a one-size-fits-all approach to insurance doesn’t work,” Rice says.

By assessing specific needs, “you can ensure that you’re not paying for unnecessary coverage while also avoiding the pitfalls of being underinsured.”

Comparing policies from various insurers is a smart move.

“Different companies offer different strengths, and what works for one business might not be the best for another,” he says. “By shopping around, you can find the policy that offers the best combination of coverage and cost.”

Bundling is another effective strategy. Many insurers provide discounts when you combine multiple types of coverage, such as property, liability and business interruption.

“This not only saves money but also simplifies managing your policies,” Rice says.

Risk management helps, too. Improving workplace safety or installing security systems can lower premiums.

Rice also advises regular coverage reviews. “Periodic reviews ensure that your insurance remains aligned with your current situation, helping you avoid both over-insurance and under-insurance.”

Partnering with a trusted agent is key, he agrees.

“Our experienced agents are dedicated to understanding the nuances of your business and the complexities of the insurance market,” Rice says.

In an environment where almost every line of coverage has gone up in price, one significant one hasn’t.

Workers’ compensation costs have declined dramatically.

“The number of claims has gone down,” Gibson says. “People’s workplaces are safer.”

Automation — robots in particular — is helping with heavy lifting. Construction companies are emphasizing safety more than ever before, through training, pre-project meetings and PPE.

“Workers’ compensation base rates are down more than 50%,” Gibson says. “However, what a company pays for coverage may not reflect that actual decrease because their payroll dollars may have gone up” because of higher salaries or more employees.

Deborah Storey is a Huntsville-based freelance contributor to Business Alabama.

This article appears in the September 2024 issue of Business Alabama.