Insurance Protection

Commercial Insurance Outlook and What Businesses Can Do Now to Prepare

2022 has been a year of tremendous instability in the insurance market. Supply chain disruptions, labor shortages, geopolitical instability, and inflation (both economic and social), have challenged the most seasoned executives and business owners in ways they could never have imagined. As we prepare to close out 2022 and begin forecasting for 2023, our hope is that this short article gives you a glimpse of what we’re expecting from the Property & Casualty business insurance market in the year ahead as well as a few things businesses can do starting today to put themselves in a position to minimize any financial disruption.

Overall market outlook

Insurance, like the economy at large, is cyclical by nature. The market oscillates between soft cycles of lower rates and expanded insurance company appetites and hard cycles of higher rates with less appetite for risk. We have been entrenched in a hard market for the past few years, and in 2023, we expect the trend to remain the same, albeit at a reduced pace. 

According to the recently released S&P U.S. Property & Casualty Insurance Report, the commercial lines insurance market is projected to finish 2022 with an underwriting profit for the second year in a row.  While that is usually a positive sign for business insurance policyholders, there’s still too much broader economic instability to start celebrating. Many industry forecasters are preparing business owners for composite rate increases somewhere between 5-8% in 2023. Some lines of business, such as commercial umbrella, business auto, professional liability, and cyber liability will experience rate increases well over that range, especially if loss history is unfavorable.

In summary, we expect that insurance companies will compete hard to win profitable business regardless of industry. For more challenging risks, or those with less favorable claims experience, the market will still likely tread very cautiously and the pricing will be driven by the profitability outlook with little room for deviation.

The one outlier in the state of Pennsylvania is Workers Compensation which has performed significantly better than expected over the past few years. For businesses with favorable claims history and strong safety practices, rate increases could be minimal, and, in some cases, premium savings could be realized. 

How can business owners prepare for 2023?

It’s never too early to take a proactive look at your business insurance portfolio. We suggest that all business owners take the following steps to help prepare them for their 2023 insurance renewals:

  • Talk about captive insurance programs with your insurance broker. Captives operate similarly to a traditional insurance program but with more flexibility for managing risk and financial incentives for better performance. They can also be a great hedge for minimizing the disruptive nature of the market cycles.
  • Reassess the valuation of your business, personal property, property of others in your care, custody, and control, and any buildings that you own. The values that you have listed on your policy for these items may be significantly less than their true value which could result in co-insurance penalties that would reduce ultimate claim payments.
  • Proactive risk management remains the best strategy for managing your insurance program.  Companies with a cultural focus on safety and risk management experience fewer claims and, as a result, remain an attractive risk for insurance companies to insure. Best-in-class operations have more leverage in the insurance market to suppress premium costs and maintain favorable coverages, even in the most challenging financial environments.  

Managing expenses is a vital part of running a business. It can be helpful to work with experienced business risk consultants to help your business be strategic about insurance costs. Contact the team at Univest Insurance at 800-220-3077 or to have a conversation about options for your business as we head into 2023.

Insurance products offered through Univest Insurance, Inc. are obligations of the issuing insurance companies, not obligations or deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the United States.