In response, many carriers are issuing higher rates and deductibles. Commercial property insurance rates could increase by as much as 25% in areas hit by a catastrophic loss, and catastrophe-prone regions could see rate hikes ranging from 5% to 20%.¹ Coverage in other locations could also see moderate increases. This depends on a variety of factors including the potential for wind and hail damage, the concentration of properties in a small geographic radius and the property’s age. The market will continue to respond to catastrophic events, so now is the time for you to take action.
Managing Your Commercial Property Insurance
There are many things you can do to help control your commercial property insurance rates. From claim prevention to regular plan reviews, a little effort can go a long way toward maintaining an affordable policy. Here are a few general tips:
- Consider deductible options for various perils and determine the cost benefit of a higher deductible.
- Ensure that property values are accurate and clearly communicated to your carrier.
- Update old roofing materials (carriers are more reluctant to offer full replacement cost on roofs 15 years and older).
- Install hail guards on your rooftop and ground HVAC units to help prevent damage.
- Outline a risk mitigation plan to help reduce exposures to severe storms, hail, flooding, wildfires and terrorism.
Other Sources of Loss
While larger catastrophic events often drive rate increases, it’s also important to address smaller sources of loss. Multi-family / habitational property owners should focus on potential tenant-related claims, which are trending upward. These extend beyond property claims, involving issues such as lease application denial, unlawful evictions, sexual harassment and inadequate security following a crime. Strengthening your risk management strategies can help stabilize liability insurance premiums and tenant retention.
When it comes to new construction and builders’ risk exposures, fire claims are a growing problem. The market is tightening and fewer carriers are offering competitive rates for large-frame new construction projects. To help secure the best rates, implement effective mitigation techniques. These can include security guards, surveillance cameras and perimeter fencing, as well as a detailed fire watch program. Taking preemptive steps can improve your premiums and loss history.
A Positive Outlook
Cost of living increases, labor shortages, rising mortgage rates and higher material costs are lurking challenges that will continually impact commercial property insurance rates. However, the property and casualty insurance industry remains well capitalized and the economy is on a positive track. The outlook remains encouraging, but it is vital to take a proactive risk-management stance now. For a more in-depth look at managing your commercial property insurance rates, contact our Real Estate Risk Services Team.
¹“Property Insurance Rates Seen Rising Sharply in 2018.” November 16, 2017. Business Insurance. Accessed on September 20, 2018 at www.businessinsurance.com/article/00010101/NEWS06/912317065/Property-insurance-rates-seen-rising-sharply-in-2018
This article originally appeared in the 2018 | ISSUE THREE of the SilverLink magazine, under the title “ Commercial Property Insurance Rates | What’s Ahead?” To receive a complimentary subscription to the SilverLink magazine, sign up here.