Within the last 24-36 months, we have experienced an environment of rising rates and premium due to:
-Billions in losses stemming from catastrophic losses and natural disasters
-Decreased carrier investment returns caused by low interest rates
-Increased re-insurance rates
-Uptick in underwriter scrutiny of renewal submissions
The global pandemic has further exacerbated the impact to businesses and presented new challenges, well documented, such as supply chain disruption accompanied by raises in material and labor costs. Recently Marshall & Swift, a real-time property cost evaluation application, suggested the expectation for a combined 15-20 percent increase in material and labor costs.
What does this mean to your business? This poses potential for significant impact in form of unexpected increases of rates and premiums at renewal. Full coverage is a floating target, and leaves the risk of being underinsured if the full replacement cost isn’t re-evaluated. If not properly negotiated, you could be pushed to buy higher than needed policy limits and pay the premium that goes along with it.
For those who have a coinsurance provision built into their property program, this can mean disruption and decreased payment in the event of a claim arising out of noncompliance. The example of coinsurance below illustrates, given the increasing costs to replace real property, just how this can impact a potential claim payment:
|Step 1:||$1,000,000 x 80% = $800,000|
|(the minimum amount of insurance to meet your Coinsurance requirements)|
|Step 2:||$400,000 ¸ $800,000 = .50|
|Step 3:||$200,000 x .50 = $100,000|
|Step 4:||$100,000 – $5,000 = $95,000|
Additionally, there has been significant disruption in the claims settlement process relative to the “increased cost of construction” contributed to by Ordinance or Law requirements during construction/reconstruction. We often identify substantial deficiencies and problem areas with how an insurance program accurately addresses the needs of bringing a building to “code” post loss.
Often, conversations we have with businesses reveal frustration, concern, and surprise of how their insurance program is designed to protect their assets. With that in mind we have designed our Freshlook process™ to advise you on factors that can impact your business, help you manage risk more effectively, and provide an understanding of creative alternative options to design your insurance program around those risks.
You can have more control around the factors that impact your business. Address the return-on-investment you’re getting out of your advisor relationship so you’re more confident about how your insurance program reflects industry standards, aligns with your risk tolerance, and would respond in the event of a claim. We work collaboratively with clients, throughout the year, to evaluate carrier loss control recommendations, assess the changing nature of their property values, and put them in a position of strength leading up to renewal.
If you’d like to explore how you can engage with us through Freshlook™, we welcome the opportunity to discuss how this process can be used to bring value to your organization. Clear facts. Better control. Reduced risk. Better ROI.
Get a better ROI from your broker. Ensure you’re in compliance. If this is a concern, call us to discuss.
(Sources: Marshall & Swift)
Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Taylor Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.