Navigating the Prolonged Hard Market: Strategies for Commercial Insurance Buyers

Commercial insurance buyers have been facing price hikes in major coverage lines for the past six years, and there is no sign of rates softening anytime soon. According to Business Insurance’s quarterly pricing chart, property insurance coverage has seen the highest rate hikes, peaking at 14.4% in the second quarter of 2023. Umbrella rates followed with a peak of 12.7% in the first quarter of 2021, while commercial auto and general liability also experienced significant increases.

Despite some specialty lines seeing decreases, the overall trend has been towards higher rates. Workers compensation is the only major line that has consistently shown decreases over the past six years, albeit modest ones. Employers still face challenges with issues such as loss control and return-to-work strategies.

As buyers adapt to the prolonged hard market, they are implementing new strategies to protect their organizations while minimizing cost increases. Experienced risk managers and insurance experts have shared their success stories with Business Insurance.

Rachel Thuerk, the director of risk management at Vicinity Energy, successfully lowered premiums by marketing the program to bring in more insurers and choices. This resulted in a 20% savings between the 2020 and 2021 programs. Vicinity Energy also focused on risk control engineering and plant surveys to reduce premiums further.

Kilroy Realty Corp. used a data-driven approach to manage the hard market at its property renewal, resulting in a 42% decrease in average annual losses for its properties. This approach helped Kilroy reevaluate its earthquake coverage needs and buy less limit.

Risk professionals like Patrick Sterling from Texas Roadhouse are emphasizing strong risk management practices and collaboration skills to navigate the hard market successfully. Scenario planning and understanding insurance policies are crucial in mitigating risks and controlling costs.

Chris Lang from Marsh LLC highlighted the use of captives and alternative risk transfer solutions to ease the burden of higher retentions. Parametric coverage and detailed submissions are becoming more common in the hard market, requiring more data and technology tools.

Overall, risk managers are exploring various strategies to manage rising insurance costs, including early reporting for workers comp claims, cybersecurity measures for the gaming sector, and utilizing captives to differentiate risks. Building strong relationships with insurers and brokers, along with accurate valuations and multi-year programs, are key to navigating the challenging insurance market.