The commercial insurance market has had a rough few years. Increased claims from the COVID-19 pandemic, higher commercial auto losses, and property losses from natural disasters have led to a hardening in the market. If it’s time to renew your commercial insurance, expect a different experience than in past years.

Carriers are lowering coverage limits and raising rates to protect their bottom line and mitigate risk. They’re charging higher premiums, implementing tougher underwriting standards, and adding new exclusions to policies.

If your commercial insurance renewal is coming up soon, here are five strategies to help you find the best coverage at the best rates.

1. Give yourself time to shop around and compare carriers

Waiting until the last minute to look for a new insurance carrier puts you at risk of a coverage gap. Coverage gaps leave you vulnerable to losses and could increase future premiums. Since it takes insurers time to learn about your business, calculate its risks, and prepare quotes, start shopping early.

While it’s easy to auto-renew with your current carrier, that may not be the best choice for your business. Premiums have been sharply increasing, and your coverage needs could have changed. Simply rolling over policies year after year can eventually leave you exposed to risk or paying too much.

If your business has a history of past losses, operates in a niche industry, or received extremely favorable terms in the past, starting to look for new carriers a few months before your current policy comes up for renewal is even more important. Because of these factors, pricing a policy could take longer. Starting early gives you time to get several quotes to compare.

Once you’ve collected a few quotes, look at the premiums but also pay close attention to coverage levels and exclusions. Picking the best insurance policy is often a balance between risk and cost. If you leave shopping for a new carrier until the last minute, you might not have the time to fully grasp the differences between the carriers and their quotes.

Even if you decide to stay with your current carrier, having additional quotes can help you negotiate.

2. Understand and be upfront about your loss history

Underwriters will scrutinize past losses when pricing a new policy. If your business history includes filing any insurance claims, be upfront about them during the application process. Giving underwriters clear and transparent data on loss histories prevents speculation or concerns which could lead to higher premiums.

In addition to disclosing any past claims you’ve filed, have an explanation for them ready for the underwriter. Explain the story around the loss — what happened, what factors contributed to the loss — and then take it a step further. How did your business learn from the experience and put strategies in place to prevent further losses?

Insurers will want to know what risk mitigation strategies you’ve put into place since the loss. And don’t be afraid to tell them how those strategies have helped you catch and prevent other losses! Demonstrating that your new risk mitigation strategies have worked goes a long way towards building confidence with an insurer. For example, TrustLayer is one of the risk mitigation tools that you can incorporate to streamline your third-party compliance management. Compliant vendors result in a reduced probability of claims and losses and present you as a good risk profile for a carrier.

Dashboard element of the TrustLayer platform (compliance status of vendors)

3. Budget for increases

Higher loss levels and increased risk are driving higher premiums in the commercial market. If your business operates in a geographic area that’s been hit by natural disasters, your P&C rates will go up. In general, property lines are seeing increased premiums of 5-20% in primary general casualty and product liability has gone up 10-20%.

A rate increase is never a pleasant surprise, so communicate the expectation of higher rates to upper management and other stakeholders. That way, they can adjust the budget accordingly. If you haven’t received quotes yet, ask your agent about standard increases for other businesses in your industry to help them ballpark.

Once you have multiple quotes, decision-makers can use them to forecast various budgets and possibly find cost savings elsewhere to offset higher insurance costs.

4. Find the right fit and establish a relationship with your carrier

The right fit for your business goes beyond affordable premiums and coverage levels. Working with a low-cost carrier can lead to headaches if you file a claim and find their customer service to be subpar. An experienced, financially stable insurance carrier may charge higher premiums, but save you difficulties in the long run.

If you operate in a smaller, less well-known industry, prioritize working with insurers who have the knowledge and expertise to cover your business. They’ll have a more accurate idea of the unique risks your industry faces.

Establishing a relationship with your carrier has benefits for both of you. You can rely on them to help you appropriately hedge your company’s risk, keeping you safe. Because they have confidence in your answers to risk assessment and know you and your business, the carrier can rest assured that your risk is covered and their policy is priced correctly.

5. Determine a safe risk level

Risk underlies everything in the insurance industry. Your company purchases insurance to hedge and mitigate risk. Underwriters price policies based on the potential risk you present to the insurer. Insurers protect against your risk but also their own. 

While you can’t entirely avoid risk in the business world, you can determine a safe level of risk for your business. Review your policy for areas where you might want to increase or decrease coverage. Risk profiles change over time and the coverage you needed five years ago is not the coverage you need today. 

Identify key areas of concern and critical coverage needs; then ensure your policy offers enough protection in those areas. When reviewing coverage, ask yourself if you need policy limits that high, or coverage in an area where you’ve never incurred a loss. If you’re more willing to accept risk in some circumstances, lowering some coverage levels could help offset rate increases.