Commercial Insurance Rates Seen Moderating

6-minute read

Relief, at last.

That may be the best way to describe how business owners should feel after hearing the latest findings from the Council of Insurance Agents and Brokers’ commercial property and casualty survey.

The key takeaway? Insurance rates continued to climb in the first quarter of 2022 but at a slower pace than in the previous quarter. Also, most lines of coverage with the exception of cyber and umbrella saw single-digit increases.

Insurance rates continued to climb in the first quarter of 2022 but at a slower pace than in the previous quarter.

These findings are in line with The Mahoney Group’s 2022 Market Report and Forecast, which was released in early January and predicted less dramatic rate increases overall this year after rates began climbing sharply in late 2019.

Cyber, unfortunately, spiked again by 27.5% in the first quarter of 2022, a reflection of ever-more sophisticated and frequent hacks of all kinds.

As anyone hoping to secure a cyber quote from a carrier at the moment will attest, doing so is simply out of the question without at least multifactor authentication in place as a security measure.

All of that aside, the first quarter did, in fact, offer a note of relief in that respondents reported an average premium increase across all account sizes of 6.6% -- considerably lower than the fourth quarter’s 8.7%.

Here are a few other key numbers found in the survey:

  • The average increase in premiums across the five major lines (commercial property, commercial auto, umbrella, general liability, and workers’ compensation), came in at 5.7%, down from 8.1% in Q4 2021.
  • That 27.5% spike in cyber insurance rates was, in fact, far better than the 3% increase seen in the fourth quarter.
  • The average increase in premiums for umbrella coverage amounted to 10.5%, down from 15% in the fourth.
  • Rate changes in the other lines tracked in the survey ranged from under 1% for terrorism on the lowest end to 7.8% for directors and officers on the highest.

The statistics surrounding cyber crime make it clear why rates for coverage continue to rise so ominously.

For starters, the Computing Technology Industry Association estimates the cost of cyber claims rose by 10% in the past year, with the average cost for a data breach amounting to $4.24 million in 2021.

Moreover, Cybersecurity Ventures estimates that businesses suffered a ransomware attack every 11 seconds in 2021. Respondents cited ransomware as one of the main methods cybercriminals used to attack businesses. Both CompTIA and Cybersecurity Ventures predicted those figures will continue to rise in coming years.

Elsewhere in the survey, respondents said carrier underwriters increasingly are checking property valuations. That increased scrutiny – designed to ensure property owners aren’t under-insuring themselves – reflects the impact inflation and other factors have had on the cost of construction materials and labor.

Tips for Insurance Buyers

It can sometimes seem as if the forces determining your insurance rates are beyond your control. But, as an insurance buyer, it’s important to know a solid risk management plan will help steer your pricing in a more favorable direction, both now and in future renewal periods. With that in mind, here are a few tips for property coverage buyers:

  • Work with your insurance professionals to begin the renewal process early. Many commercial property insurers are seeing an increased submission volume. Timely, complete and quality submissions are vital to ensure your application will be reviewed by underwriters.
  • Determine whether you will need to adjust your business’ retentions or limits to manage costs.
  • Gather as much data as possible regarding your existing risk management techniques. Be sure to work with your insurance professionals to present loss control measures you have in place.
  • Conduct a thorough inspection of both your commercial property and the surrounding area for specific risk management concerns. Implement additional mitigation measures as needed.
  • Analyze your organization’s natural disaster exposures. If your commercial property is located in an area prone to a specific catastrophe, implement mitigation and response measures (e.g., install storm shutters on windows to protect against hurricane damage, or utilize fire-resistant roofing materials to protect against wildfire damage) to protect your property as much as possible.
  • Develop a documented business continuity plan (BCP) that will help your organization remain operational and minimize damages in the event of an interruption. Test this BCP regularly with various possible scenarios. Make updates when necessary.
  • Address insurance carrier recommendations. Insurers will be looking at your loss control initiatives closely. Taking the appropriate steps to reduce your risks whenever possible can make your business more attractive to underwriters.

The Mahoney Group is one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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