Commercial Insurance Pricing Trends and Challenges in 2022

What is Commercial Insurance?

Commercial business insurance is coverage for businesses and corporations, generally designed to cover the businesses, its employees, and ownership. Since there are so many types of businesses, commercial insurance also must be aligned according to the needs of those businesses.

Commercial insurance is aimed at helping businesses stay protected against risks that may threaten their success. Depending on the commercial line’s coverage, it can be specifically aimed at protecting the reputation, wellbeing, and financial situation of a business and the employees working for the business.  

Unlike personal insurance, commercial insurance can cover multiple stakeholders and employees. Commercial insurance also differs from personal insurance because it tends to have much higher limits of coverage since there’s typically more physical property at stake.

There are many types of commercial insurance. A few of the most common include:

1. Commercial auto insurance can be helpful for businesses that rely on automobiles to conduct daily business. Commercial vehicle insurance is a policy of physical damage and liability coverages for usage that are covered by a personal auto insurance policy. This type of business insurance covers many types of commercial vehicles—from automobiles used for business purposes, including company cars, to a wide variety of commercial trucks and vehicles. 
2. Equipment breakdown insurance is also known as boiler and machinery insurance, or mechanical breakdown insurance, equipment breakdown insurance helps cover:

• The cost to repair or replace damaged equipment, including time and labour
• Lost income
• Spoiled inventory
• Necessary expenses incurred during the restoration period

3. Packages and Business Owners Policy (BOP) Insurance is a common solution for business owners because it may offer cost savings to “bundle” several policies together. Packages and BOPs can differ from business to business or carrier to carrier but may include property, general liability, crime, and inland marine.

4. Worker’s compensation insurance is another common form of commercial insurance and is often required by law. This insurance protects the company from lawsuits in the case of a work-related injury or accident experienced by an employee and helps cover medical costs for an employee injured on the job.

5. Cyber liability insurance is a growing form of commercial insurance that can cover businesses in the event of data breaches and other cyber security threats. Since businesses hold a great deal of personal information on their servers, the threat of being hacked can have lasting financial repercussions.

6. Business interruption insurance is also a smart investment in terms of commercial insurance. This can help protect your business from financial losses in the chance that a covered accident or an unexpected event prevents your company from operating. 

The top 10 Writers of Commercial Lines Insurance by Direct Premiums Written 2021

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

Challenges in the Commercial Insurance Market

Recent challenges that have impacted the Commercial Insurance market:

1. First, the COVID-19 pandemic and related economic recession have had significant impacts on businesses, insurers included.
2. Second, the industry is contending with: “A prolonged period of increasing claims, lower returns, lower profits within the industry, and much greater scrutiny among multinational insurers about where and how they put their capital to work in markets around the world.

Steps were taken by Insurance companies to mitigate the Challenges

• Collaboration – The key is a collaboration between the insurance industry, governments, the public, and trade associations. Companies have become a fundamental advocates for multi-stakeholder collaboration. For instance, in the Canadian market, IBC has put forward a series of recommendations for working together to improve the availability and affordability of commercial insurance.
• Proactive – Companies have become more aggressive and provide direct assistance through the helpline and dedicated managers to improve sales and provide policy recommendations. 

Commercial Insurance Pricing Trend in 2022

Prices for Commercial Insurance have been on the rise since 2021. According to reports from Marsh Insurance, the Global Commercial Insurance price rose by 11% in the first quarter of 2022. The price increase has impacted across the globe right from the US, UK, Europe, and the Asia-Pacific region. The key factors impacting the increase in the rate of Commercial Insurance-

1. Ukraine Crisis – War in Ukraine has increased the pressure on the insurance market
2. Rising Inflation – US inflation rose at the annual rate of 8.4% last month – the highest inflation rate since 1980. Globally, inflation is at a very high rate. This has affected insurance rates.