Commercial Insurance Renewal Guide

Strategies to successfully navigate your business insurance renewal in uncertain times

Strategies to successfully navigate your business insurance renewal in uncertain times

Business as usual is anything but usual, affecting your operations for the foreseeable future. Not surprisingly, your next insurance renewal is unlikely to be as straightforward as it may have been in the past. The hard market and COVID-19 impacts have introduced added complexities, which makes it crucial to prepare early for your insurance renewal.

This guide reviews the challenging insurance market and reasons behind it. More importantly, it provides detailed tips and strategies to help you obtain the best coverage terms and rates that thoroughly meet your business’ unique and evolving needs.

Understanding Today’s Insurance Market ...................................................... 3Current Trends Impacting the Market....................................................................... 3Factors That Influence Premium Rates .................................................................... 4COVID-19 Impacts ................................................................................................. 5

Considerations for Your Upcoming Insurance Renewal ................................... 67 Cost-Control Strategies ....................................................................................... 6 Increased Underwriter Scrutiny ............................................................................... 710 Tips for Insurance Buyers .................................................................................. 7

Submitting Your Insurance Renewal ............................................................103 Steps to Prepare for Renewal Submission .......................................................... 10Key Areas of Preparation ...................................................................................... 10Renewal Action Plan ............................................................................................. 11

Essential Traits of an Insurance Broker ........................................................12

Final Thoughts .............................................................................................14Key Considerations .............................................................................................. 14Additional Resources ........................................................................................... 14

About CBIZ Insurance Services, Inc. ............................................................15

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After approximately 20 years of a soft, buyer-friendly commercial insurance market, many businesses are experiencing significant premium increases. In fact, for some types of coverage, businesses may see double-digit rate increases at their next renewal.

Understanding Today’s Insurance Market

Insurance is complicated and can be one of your business’ most expensive line items. As you take a closer look at your expenses for the upcoming year and plan your budget, it is important to understand what is going on in the insurance underwriting market and how it may impact your premiums.

We are now in what is considered a “hard market” where we see a consistent increase in renewal premiums and the tightening of underwriting guidelines and coverage offerings. After approximately 20 years of a soft, buyer-friendly commercial insurance market, many businesses are experiencing significant premium increases. In fact, for some types of coverage, businesses may see double-digit rate increases at their next renewal.

In addition, some insurance limits that were easily obtainable in the past might not even be offered to certain businesses. This, coupled with the increased risk from catastrophic events and the pandemic, supply chain disruption, business continuity and even the COVID-19 response, is creating a more difficult environment for insurance buyers to access affordable and available coverage limits.

Current Trends Impacting the MarketThere are many powerful trends impacting the current insurance market, most notably:

■ COVID-19 – The pandemic continues to be a top-of-mind concern for organizations and individuals across the globe. While many essential businesses (e.g., hospitals, pharmacies, grocery stores, gas stations) remained open, other operations deemed nonessential shut down temporarily, changed the nature of their operations or may be considering closing their doors for good.

■ Social Inflation – This is a term used to describe a group of societal trends that are influencing the ever-rising costs of insurance claims and lawsuits. Increased litigation is at the root of this trend. Litigation funding allows most or all of the costs associated with litigation to be covered by a third party, which has increased the volume of cases and the cost of litigation since plaintiffs are able to take cases further and seek larger settlements. This situation is made more challenging by an increasing public perception that businesses – particularly large ones – can afford the cost of any damages. In the current environment, nuclear verdicts (awards of $10 million or more) have become more common. Ultimately, these factors lead to policy holders paying higher costs for coverage.

■ Extreme Weather Events – In California, more than 8,100 wildfires have scorched 3.9 million acres and destroyed more than 7,500 buildings. In the Midwest, flooding along the Mississippi River and its tributaries caused an estimated $6.2 billion in damage across 13 states. On the East Coast, hurricane season affected multiple states along the Atlantic Ocean, causing billions of dollars in damage. As disasters such as severe storms, extreme temperatures, wildfires and flooding become more frequent, expect to see more emphasis around weather readiness, especially from an insurer’s perspective.

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Carriers are focusing more than ever on controlling their loss ratio, resulting in increased premiums, greater scrutiny on renewing high risks, lower interest in writing new coverage for high-risk clients and a lower likelihood of extending high-casualty limits.

Understanding Today’s Insurance Market (continued)

■ Recession Concerns – Premium dollars are used almost exclusively to pay claims and administrative expenses (e.g., payroll, taxes, office expenses, advertising, etc.). Many insurers actually pay out more than they take in from premiums. Profits from investment activities support their financial viability. The investment piece allows them to make a profit and thus stay in business. Since investment income is being impacted by the recent economic difficulties, insurance companies are taking steps to remain profitable.

Given this tough market, carriers are focusing more than ever on controlling their loss ratio (losses ÷ premium) and reducing their loss combined ratio (losses ÷ [premium + expenses]). This results in increased premiums; greater scrutiny on renewing high risks; lower interest in writing new coverage for clients in high-risk business types/locations or those with prior losses; and a lower likelihood of extending high-casualty limits.

Factors That Influence Premium RatesInsurance premiums depend on many factors specific to your business. Since insurance cost is such a huge part of your budget, it is important to know what they are. Here’s an overview:

■ Type of Coverage – The forms of insurance you are seeking and the details

of the coverage (e.g., limits of liability and value of insured property) will affect your insurance pricing.

■ Size – As a general rule, the more employees your business has and the larger your revenue is, the more you typically will pay for insurance. As your business grows, your risks grow, too, which means the likelihood that your business will experience some type of claim increases.

■ Industry – Some industries inherently carry more risk than others, and additional factors often come into play in determining the risk rating. For example, construction is considered a higher risk in New York City, in part because the Scaffold Law permits injured workers to sue for workers’ compensation benefits and make a general liability claim (where the norm elsewhere is to collect workers’ compensation only). For truckers, payload may determine risk. For example, hauling fuel is a much higher risk than hauling benign or inert cargo. A fireworks manufacturer is going to be higher risk rated than a manufacturer of widgets. As you would expect, the higher the risk, the more likely an insurance claim could be filed and, thus, insurance premiums are higher.

Factors That Influence Premium Rates

Type of Coverage Size Industry Location Claims History

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■ Location – If your business is located in an area prone to certain natural disasters (e.g., wildfires, hurricanes, flooding), insurers may determine that your facility is more at risk for property damage, which translates to higher insurance premiums.

■ Claims History – Your business’ claims history, often referred to as your loss history, will have a significant impact on insurance rates. If your business has an extensive claims history, insurance carriers tend to consider your company more likely to file future claims. This, in turn, means that your business will be viewed as risky to insure, subjecting you to higher commercial insurance premiums.

COVID-19 ImpactsThe convergence of today’s insurance market with COVID-19 is creating a real challenge. While the verdict is still out on the full impact of COVID-19, it is expected to be significant. Increased insurance risks from the pandemic include:

■ Safety – COVID-19 requires enhanced cleaning and disinfecting of work and public spaces, masks and gloves, and the ability to screen for symptoms in a number of industries. If not previously addressed in your safety plan, these hazard controls should be added and communicated to employees. All training efforts should be documented on an ongoing basis.

Further, in quickly changing environments such as COVID-19, businesses must take extra measures to stay current with evolving local, state, CDC and OSHA laws and guidelines in order to keep employees safe and stay compliant.

■ Technology – With the increased need for remote work arrangements, many organizations had to immediately support a virtual infrastructure, expand videoconferencing, upgrade cybersecurity and/or increase call center support. Increased data breach attempts were reported across all industries and business sizes. Continued assessment of possible exposures related to infrastructure and technology changes is critical.

■ Contracts – Many businesses temporarily shut down, shifted operations or experienced disruptions in supply chains. These changes likely introduced new exposures and meant that you or your suppliers were unable to perform contracted work. You may need to evaluate contracts and the associated risks resulting from these changes. Be sure you understand how much risk you are assuming and what your responsibilities are. Your risk advisor can provide guidance with respect to contractual risk transfer.

■ Business Continuity – The ability to efficiently operate is being tested. Documenting your experiences while fresh in your mind and using it to update business continuity plans, procedures and training will improve your organization’s resilience. Take time now to debrief and discuss what is going well and what could be improved. Using these lessons learned will help ensure you can endure similar disruptions in the future.

Understanding Today’s Insurance Market (continued)

Considerations for Your Upcoming Insurance Renewal

In today’s market, businesses are seeing significant changes in insurance premiums and coverage options when renewing their commercial insurance. Starting the renewal process early allows you to work with an expert to help evaluate risk and consider needs while giving you time to make the best decisions to protect your organization.

7 Cost-Control StrategiesWith insurance costs rising, you are likely wondering what you can do to control them. While price should never be the main driver in determining your insurance coverage, the following strategies should help you obtain the coverage you need at the best price:

1. Get expert help. Now more than ever it’s important to work with a broker who is focused on your industry and takes the time to truly understand your business, operations and specific exposures. Doing it on your own may seem like it will save you money, but the right broker will leverage their relationships and access to insurance carriers to negotiate on your behalf, ultimately securing the best risk management solution for your dollars.

2. Review coverage annually. Take time to evaluate the coverage(s) you currently have and work with your broker to determine if it is appropriate based on your current business situation. Not only do you want to make sure existing exposures are covered but also that you aren’t paying for coverage you don’t need. Consider what changes have been

made to your business in the last year and how those impact your coverage needs. For instance, did you add or reduce staff, vehicle fleet or equipment? Likewise, you want to make sure you aren’t duplicating coverage in other policies. Review policies for changes such as adding sublimits, changing deductibles, enacting policy safeguard limitations and more. Take time to read the fine print so you know what is included or excluded. Ensure you’re comfortable with and clear on the terms. If you don’t understand the policy, ask your broker for clarification. A careful review and comprehensive conversation with your broker will allow you to right-size your coverage.

3. Pay higher deductibles or lower limits. The deductible is the amount you pay for a covered claim before your insurance carrier starts paying. The limit is the maximum amount of money an insurer will pay toward a covered claim. So if you assume more risk in the form of a higher deductible or lower limit, your premium should decrease. When considering this tactic, determine what amount your business could afford to pay in the event you need to file a claim.

4. Properly classify employees. While specific to workers’ compensation insurance, correct employee classifications are important in securing the right coverage. If employees are incorrectly placed in a category that may suffer more injuries, it could result in higher workers’ compensation premiums.

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7 Cost-Control Strategies

Get expert help

Review coverage annually

Pay higher deductibles or lower limits

Properly classify employees

Implement risk controls

Take advantage of credits

Explore alternative funding

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Considerations for Your Upcoming Insurance Renewal (continued)

5. Implement risk controls. Strong risk controls show that your company is serious about managing risk. Take advantage of risk control programs provided by your insurer. Strategies such as employee training, a comprehensive safety program and use of personal protective equipment focus on preventing injuries and accidents. This in turn results in fewer losses, which can lower both workers’ compensation and general liability premiums.

6. Take advantage of credits. Insurers offer various credits that can reduce the cost of insurance. You could qualify for training and safety program credits or even a loyalty credit if you’ve been with your insurance carrier for a while. Work with your broker to explore more potential savings in the form of a credit.

7. Explore alternative funding. In today’s market where coverage is difficult to obtain or afford, alternative funding may be an option to consider. Some alternative risk transfer solutions can provide advantages in insurance savings, wealth transfer and risk management. If your organization is in strong financial health with a minimal loss history, you may be a good candidate for alternative funding.

Increased Underwriter ScrutinyToday’s market means additional questions and greater scrutiny from insurers. Be ready to address COVID-19’s effect on your finances and expected future impact, as well as how effective your organization was at implementing your business continuity plan. To put your company in the best position to negotiate, identify the top questions underwriters are asking during renewal and have your answers ready.

10 Tips for Insurance BuyersIn addition to the cost-control strategies discussed, the following should help you position your business for the most favorable rates, terms and coverage:

1. Start your renewal process early. Rates are increasing across the board, so engaging early with insurers will ensure you have enough time to prepare. Your broker should schedule a meeting at least 60 to 120 days out to discuss what underwriting information is needed and how to best present it.

2. Evaluate current carrier(s). Check your carrier’s financial strength by consulting resources that publish strength ratings for insurance carriers, such as AM Best, Fitch Ratings, Moody’s Investors Service and Standard & Poor’s. Your broker should be monitoring the carrier’s financial strength and letting you know of any changes that may impact your service and coverage.

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Considerations for Your Upcoming Insurance Renewal (continued)

3. Conduct a risk assessment. Gather as much data as possible regarding your exposures and existing risk management techniques. Pinpoint your exposure and cost drivers then identify the best loss control solutions to address your unique risks. Make two lists – one with the top business losses you could suffer that have the greatest chance of happening and another with the losses that could cause the greatest damage to your business. Review these lists with your risk manager or insurance broker to ensure you have the coverage in place to respond to all of them.

4. Enhance risk management strategies. If you have an active risk management program in place, continue to focus on it and ensure all levels of your business have “bought in” – from the president/owner to the new hire. If no programs are in place, work with your risk manager or insurance broker to create and implement risk management and loss control programs (safety manuals, fleet safety programs, employee handbooks, hiring guidelines, etc.). Loss control and safety management programs should be targeted toward the loss trends and identified uncontrolled risks. Make sure you address any open insurance carrier recommendations prior to renewals.

5. Build a culture of safety. Safety needs to be a culture in the workplace. A true and effective culture of safety is present only if and when each and every employee, no matter the level, is responsible for creating and maintaining a safe work environment. According to the Occupational Safety and Health Administration (OSHA), businesses that implement effective safety programs operate more efficiently, reduce absenteeism, increase morale and boost productivity – all of which improve your bottom line.

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Now’s the time to take a step back and critically evaluate your overall risk profile and consider all risk funding options.

Considerations for Your Upcoming Insurance Renewal (continued)

6. Develop a business continuity plan. Create a solid business continuity plan to account for disasters and other unpredictable risks. A written plan that details how your organization will respond to and resume business after a major disruption is essential. Once in place, it should be reviewed and updated at least annually. If your business experiences a disruption, take time to debrief and update the plan to reflect any insights gained from that event. This will help your organization greatly improve its ability to weather similar future disruptions.

7. Establish hiring practices. A bad hire can cost you more than you stand to gain. Perform additional due diligence before extending offers. Perform background checks and drug tests, and call references. If you are hiring a driver, be sure to receive a copy of their driving record as part of due diligence. Simply put, make sure you know who you are hiring.

8. Manage claims. To keep costs down, you must stay on top of claims. Your broker should provide claims reports, which summarize claims and loss ratios. You should also receive an analysis of claims trends to help identify any potential areas of exposure. This allows you to implement necessary risk controls. Make sure you and your broker are monitoring open claims and working to get them closed as soon as possible while obtaining a fair settlement.

9. Explore coverage options. Moving forward there may be new coverage for COVID-19 or pandemics, but it is unclear whether any insurers will use these forms and offer the coverage. It’s also hard to know if the premiums for pandemic coverage will be affordable. Regardless, it should be explored if made available.

Consider purchasing or increasing the limits of an umbrella liability policy to ensure sufficient protection should you find yourself in a catastrophic lawsuit. High-limit umbrella coverage may require multiple layers of coverage with different carriers. Your broker should be able to manage that process for you.

10. Consider alternative funding in the form of a captive. A captive insurance company is an insurance entity that your business would own to provide insurance or risk protection to your company. Basically, it is a form of self-insurance that can provide financial benefits for qualifying companies. Now’s the time to take a step back and critically evaluate your overall risk profile and consider all risk funding options.

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Submitting Your Insurance Renewal

To stand out in today’s tough market, you need to have a favorable underwriting profile.

To stand out in today’s tough market, you need to have a favorable underwriting profile. Hard markets make underwriters more critical, so it’s prudent to come prepared to address concerns the underwriter may have. You should also explain any factors contributing to a specific loss and the steps you have taken to mitigate the risk of a future loss as underwriters will take these into consideration.

3 Steps to Prepare for Renewal SubmissionBegin your insurance renewal preparations early enough to ensure you aren’t blindsided with no time to shop should need be. These three steps will get you started:

1. Gather required paperwork.■ List of all legal entities■ Physical addresses for all locations with

employees – remote and offices■ Updated annual payroll by class code

and state■ Full-time versus part-time employee payroll

by class code■ Five years of loss runs reports from your

previous carrier (currently valued within 90 days of renewal)

■ Supplemental applications as applicable

2. Create an effective submission.■ Include a detailed description of your

operations, including changes in the last policy period and risk controls

■ Explain any claims and the actions you’ve taken to mitigate future losses

■ Define your safety and loss prevention efforts

■ Describe other attributes that positively impact your organization’s risk profile

3. Prepare in advance.■ Implement carrier loss control services■ Use carrier risk management tools■ Consider multi-year rate guarantees■ Work with a broker who has expertise in your

industry and excellent carrier relationships to negotiate on your behalf

Key Areas of PreparationProactively addressing specific factors related to your business and its risk management activities is key in preparing for your insurance renewal. Areas to consider include:

■ Business Changes■ Have there been substantial changes

in your operations or business practices?

■ Are there any significant changes in your finances, liquidity or cash flow?

■ Have you experienced a change in workforce (furloughs/layoffs/hiring/remote workers)?

■ Are you considering a merger or acquisition?

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Submitting Your Insurance Renewal (continued)

Planned Action Responsible Party

Begin Renewal Process■ Request required information from client (sales

records and history, payroll data, profit and loss statements or income tax forms)

■ Schedule renewal meeting/determine strategy

Broker

Completed Information Returned to Broker■ Applications■ Carriers & Lines of Coverage to Quote■ Updated Risk Exposures

Business

Carrier Submission■ Prepare and submit underwriting portfolios

with quote due date■ Coordinate insurer inspections

Broker

Quote Proposal Receipt from Carriers■ Evaluate quotes and identify cost and coverage

changes■ Prepare presentation and recommendations

for client

Broker

Proposal Presentation■ Review current carrier options■ Review other carrier options■ Review other lines of coverage■ Answer any questions

Broker

Insurance Decisions ■ Carrier(s) selected■ Coverage(s) selected■ Risk strategy decided

Business

Coverage Secured■ Binders, Invoices, Certificates, Auto ID Cards,

Claims Guide DeliveredBroker

■ Policy Review■ Do your policies offer the right amount

of coverage to protect you from risk? ■ Have you done a recent risk analysis

to understand if you need to adjust coverage (such as cybersecurity or D&O)?

■ Have you considered optional deductibles?

■ Have you recently received a replacement cost valuation?

■ Have you adjusted estimated payroll or revenue on your current policy?

■ Claims Data■ Are your reserves at the right limit for

open claims?■ Do you have any claims that can or

should be closed?■ Is your experience modification rating

(EMR) accurate?

■ Risk Management■ Has your broker provided a recent loss

control or site survey?■ Has your risk tolerance changed?■ Did you meet your risk management

goals? If not, why?

Renewal Action PlanThis is the plan your broker should follow, including the steps they should take to obtain the best coverage and premiums for you.

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Essential Traits of an Insurance Broker

Find a broker who sees the bigger picture while maintaining a realistic scope of vision. They should make room for flexibility in the long term while realizing the issues that are of importance now.

The experience and expertise of your insurance broker is your most valuable resource for all aspects of the insurance underwriting process. A qualified broker can help you analyze your business, provide the guidance and insight needed to be ready for stricter underwriter scrutiny, and put you in a positive position for your renewal.

When evaluating your insurance broker relationship, be sure they have the following five traits:

1. Vision – Find a broker who sees the bigger picture while maintaining a realistic scope of vision. They should make room for flexibility in the long term while realizing the issues that are of importance now. For instance, since insurance rates are rising, your broker should help determine ways to keep needed coverage at an affordable cost. Do you need to raise limits or deductibles? Should you explore alternative funding? You want a broker who can suggest worthwhile risk management options based on their understanding of the diverse characteristics of your business.

2. Market Commitment – Seek a broker who has a commitment to and deep knowledge of your industry and business size. Ask your broker how they keep up with emerging risks so you can be confident their advice is sound, timely and relevant to your market position. If growth is in your future, be sure your broker is scalable and can serve your organization as it grows. A commitment to professional development should also be apparent. Does the broker have the Chartered Property Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC) and/or Advisor in Insurance (AIA) designations, which rank as the leading credentials in the insurance industry? That level of education and know-how reflects their commitment to stay on top of the latest trends in the insurance industry – and yours.

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Essential Traits of an Insurance Broker (continued)

3. True Partner – Look for a broker who goes beyond a transaction to truly develop an advisory relationship. When a broker meets with clients on an ongoing basis, often participating in board meetings, this enables them to serve as an educated and integrated partner and extended member of your team. In turn, they can anticipate and communicate risks from changes in business operations, enabling you to make highly informed decisions.

4. National Resources – The insurance market never stops evolving, so it’s imperative your insurance broker has the in-house support of complementary services, such as accounting and human resources, that clients can leverage if desired. A broker who delivers service locally and is backed by national expertise will best guide your risk management plan.

5. Independence – A quality broker will have positive, strong relationships with insurance carriers. However, since carriers go in and out of markets constantly, you’ll want to know where the recommended carriers are in this cycle. Ask what factors the broker considers when recommending an insurance carrier, such as their AM Best rating, historical financial stability and their long-term commitment to the industry sector or product line. You may also want a broker who works with insurers that have a national footprint, provide the required pre- and post-loss control services, feature strong claims departments and have a desire to enter into a true working partnership.

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Final Thoughts

Additional Resources

■ Commercial Insurance Renewal: Underwriter Questions to Expect Post-COVID-19

■ 5 Tips to Navigate Your Insurance Renewal in Light of COVID-19

■ Business Insurance: Where Not to Cut Corners

■ Building a Culture of Safety Toolkit

Starting early on your insurance renewal and performing the due diligence required will ensure that your company obtains the most favorable pricing and terms. A proactive and detailed approach could be the difference between double-digit increases or possible exposure gaps and the most cost-effective protection.

Key Considerations■ Pre-Renewal Meeting – Your insurance

broker should reach out to you at least 60 to 120 days in advance of your policy renewal date to discuss creative solutions to ensure your organization is adequately protected at the most affordable cost. A risk assessment should be performed at this time to identify any new or changing exposures. This is particularly important now due to the various financial and operational impacts of COVID-19.

■ Address Outstanding Risk Management Items – If possible, close any open claims and take a moment to consider if there are any trends that might need further research. Your broker should provide a loss history analysis and make recommendations to reduce future claims. Make sure you’ve implemented all risk control recommendations your broker or insurance carrier provided. Closing the loop on claims and risk controls will put you in the best position for your renewal.

■ Highlight Risk Controls – Call out any risk mitigation strategies you have in place that help limit your exposures. These could include safety training, safety manuals, fleet safety programs, employee handbooks and hiring guidelines. Insurers will be looking at your loss control initiatives closely. Taking the appropriate steps to reduce your risks whenever possible can make you more attractive to underwriters.

About CBIZ Insurance Services, Inc.

At CBIZ Insurance Services, Inc., we’re passionate about providing strategic solutions tailored to cover your particular exposures and protect your assets. This isn’t cookie-cutter consulting.

Our team of forward-thinking risk control professionals will support and collaborate with you to develop an actionable plan designed to supplement your risk management strategy. We go beyond the obvious risks and identify the exposures with the highest impact to your bottom line. You can count on us – with over 25,000 clients and 300 associates nationwide – as your trusted advisors committed to your success.

To learn more, visit us at cbiz.com/insurance.

The information contained herein is for general purposes only. CBIZ Insurance Services, Inc. (“CBIZ”) does not make any warranties of any kind about the completeness or accuracy of this information. Any action you take upon the information in this material is strictly at your own risk. CBIZ is not liable for any losses and damages from the use of this information.

© Copyright 2020. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved.