Small Business Insurance Outlook 2023 – Forbes Advisor

As any small business owner knows, running a business can be a risky endeavor. From liability claims against you to cyberattacks, there are many potential hazards that can threaten a company’s livelihood.

From rising inflation to employee turnover, these are the issues that may have an impact on your business insurance needs next year.

Demand for Cyber Insurance Rises

With the continued advancement of technology, small business owners face increased risk of cyberattacks. Adequate business insurance is crucial.

“From June 2021 to June 2022, Acuity Insurance saw cyber liability insurance claims increase by more than 50% on commercial insurance policies,” says Paige Nelson, director of product development at Acuity Insurance.

Nelson notes that even if you want to keep your small business insurance costs as low as possible, adding a cyber endorsement will cost you far less than the damage from any cybercrime would. “At Acuity, the cost to add an endorsement for cyber protection to a commercial policy starts at approximately $260 per year,” says Nelson.

Even LLCs should be looking into cyber insurance in 2023.

“Small companies sometimes assume that cyber criminals only target big firms because there is more to gain financially, but the reality is small businesses that don’t properly cover their exposures present an opportunity for cybercriminals,” says Erin Rodliff, senior vice president of small commercial underwriting and product at Travelers Insurance.

To help mitigate the risk of cyber-attacks and data breaches, Rodliff recommends that business owners implement the following:

• Educate employees on how to keep company information safe.
• Enable multi-factor authentication (MFA) and endpoint detection and response (EDR) tools.
• Review your cyber liability insurance policy if you have one.
• Create a crisis communication plan for internal and external parties.

Workplace Turnover Leads to More Workers Compensation Claims

Nearly 3% of U.S. workers quit their jobs each month from May through September 2022, according to the U.S. Bureau of Labor Statistics. About 1% of workers were affected by layoffs during the same period. As employee turnover continues into 2023, insurance experts say companies should anticipate an uptick in workers compensation insurance claims.

“We know from our workers compensation claim data that more than one-third of workplace injuries occur during the first year on the job,” says Rodliff. “In fact, the 2022 Travelers Injury Impact Report—which analyzed more than 1.5 million workers compensation claims over a five-year period—found that first-year employees represented 38% of all small business workers compensation claims.”

As a small business owner, you can help reduce the likelihood of workplace illnesses and injuries by updating your processes for employee onboarding, training and support.

Supply Chain Bottlenecks and Labor Shortages Delay Insurance Claims

“Supply chain bottlenecks and labor challenges are making repairs and replacements more expensive—both in price and downtime cost,” says Nelson at Acuity.

Take commercial auto insurance claims, for example. If you own a delivery business and there’s a delay in getting new parts or a replacement vehicle, it can significantly hinder your daily operations. The same is true for property claims, where increased construction material costs and a delay in repairs can lead to a loss of income—especially if your business property is uninhabitable.

To help reduce these risks, Nelson says business owners should work with their insurance agents to ensure their business is properly covered.

Loss Prevention Measures Are Key for Commercial Properties

As labor shortages and supply chain bottlenecks drag on into 2023, it’s increasingly important for small business owners to look into loss prevention measures.

“More frequent and more severe natural disasters are driving high demand for construction materials and skilled workers, inflating the cost to rebuild businesses impacted by wildfire, hurricanes, floods, wind and hailstorms, in addition to the cost to repair damage from claims involving fires or broken plumbing,” says Jack White, head of business insurance sales and marketing for Farmers Insurance.

As a result, small business owners should review your commercial property insurance policies to ensure you have adequate protection in place.

According to White, small business owners might want to consider investing in loss prevention measures, such as:

• Installing security cameras and sprinkler systems
• Providing routine maintenance on electrical systems, furnaces and water systems
• Implementing hours of operation, fire safety inspections, severe weather procedures, lock-up procedures and escape plans for fire and response teams for medical emergencies
• Maintaining general cleanliness on the property to help prevent slips and falls
• Requiring contractor licenses and certifications, food safety certifications and cleanliness

Voluntary Benefits Become More of a “Must-Have”

Voluntary benefits are benefits you provide to your employees that they may choose to accept or decline. Examples of voluntary benefits often include disability insurance, financial services, health insurance, legal assistance, supplemental life insurance and pet insurance.

In the past, voluntary benefits were considered a nice perk for employees, but not essential.
But during times of high inflation, voluntary benefits can help attract and retain talented employees. It’s also a good way for your employees to offset the cost of unexpected problems.

For example, short-term disability can help your employees stay financially afloat if they are dealing with medical problems or pet insurance can cover the cost of a veterinary emergency.

“Because small businesses are vital to the economic health of individual communities and for our nation as a whole, it’s important to provide insurance solutions of value during challenging economic times,” says Rich Williams, president of Combined Insurance, a Chubb company.