Many California business owners have forgot that the price of commercial insurance has fallen steadily for the past 5 years, as we call it in the insurance industry a "Soft Market", and rightfully so as many business are struggling to survive. As a commercial insurance broker I feel fortunate that the economic cycle and the soft market insurance cycle have worked together the past few years, giving businesses a fighting chance at surviving these economic conditions with out facing increasing insurance expenses. As a commercial broker though I am all to aware that this trend is just that, a trend and it will come to end and rates will increase. As reported by
Advisen rates are predicted to level off by the end of June, 2009 and begin increasing by late '09 and through 2010.
Their are many factors that contribute to the pricing of insurance in the marketplace including but not limited to insurance company returns(no comment necessary), capacity of the market, demand for insurance to name a few. We have already seen the hard market set in when concerned with certain products such as DIC (Earthquake and Flood Coverage) which is seeing 15%-30% increase, workers compensation is expected to increase 20%, and most other renewals have slowed their decline or leveled off. One large effect seen in keep insurance premiums low is the fact that many businesses have a reduced exposure(Payroll, Gross Profit, etc.) which is keeping premium's down and will mitigate any increases if they are taking place.
California Business owners also have to worry about climbing
workers compensation insurance rates in 2009 and beyond as health care rates show no signs of slowing. These health care expenses place increased pressure on the workers compensation system as claims increase in costs.
So what is a California business to do about the impending commercial insurance "Hard Market"? If your commercial insurance policies are a significant expense to your business, you do have some choice with your broker to minimize the impact the "Hard Market" will have on your business. These tactics include negotiating long term rate locks, determining the best long term home for your business (which company will likely keep competitive rates), evaluating gaps in coverage, and determining you have the correct policies in place. Industries like the
construction and finance are being affected by the current trends in their respective sections and are likely to take are increases in the coming cycle. Many speciality coverages that will not be always be affordable or available can be purchase will minimal expense and they include,
Director's and Officer's coverage,
EPLI,
E&O, etc. Your independent commercial insurance broker is a partner in your business and should be there to help you through this "cycle" and position you to take advantage of the next one.
Tim Pine
Commercial Insurance Broker
Arroyo Insurance Service
(800) 401-6764
