Oct 25, 2021
Why Are Insurance Premiums Rising?
Most business owners who are seeking to renew their insurance premiums have noticed a spike in the prices of up to 50% in some cases. In addition, some insurance companies are unwilling to offer certain insurance products entirely. This has raised concern for a lot of small business owners who face many other challenges to their businesses daily.
As a small business owner, the big question on your mind might be, why are insurance premiums rising? And how can you run your business at the lowest cost based on this reality? There are many reasons why there is an ongoing hard market, a situation where premiums keep rising, resulting in a drop in industry profits. As opposed to a soft market, where many insurers compete for businesses due to a fall in insurance premiums.
Reasons for Increase in Insurance Premiums
All over the world, insurance premiums are being affected by three main invisible hands; a persistent decline in interest rates, a rise in the number of claims as well as a rise in the cost of claims.
- Falling interest rates: Investment income remains one of the primary sources of revenue for insurers, and with falling interest rates and even zero interest in some countries, profits in the insurance industry have also dropped. To make more income, insurers have resorted to increasing premiums and outrightly refusing to sell some insurance products.
- A rise in the number of claims: Due to unfortunate incidences like COVID 19, floods and cyclones in New Zealand and other parts of Oceania, there has been a rise in the number of claims for insurers and a resulting large number of payouts. This has affected the revenue of insurance companies and has forced them to increase insurance premiums, to stay afloat and make a profit.
- A rise in the cost of claims: The unfortunate incidences and breakouts have led to a decrease in the number of resources, especially workers in affected areas. It has been estimated that claims in the past two years due to these events are more than $2 Billion. Financial institutions, hospitals and other medical firms, and the auto industry have experienced an immense number of class actions being thrown at them. Other businesses have also experienced higher insurance premiums because most of them had to change the location or nature of their business activities with a higher likelihood of burglary. Their business profile automatically changes to high risk, leading to higher insurance premiums.
How an Insurance Specialist Can Help You Achieve Lower Insurance Premiums
With the constant rise in insurance premiums, it has become more pertinent for businesses to seek advice from specialised insurance brokers. This will help reduce the money and time spent in finding alternative insurance covers. An insurance specialist or broker will help you make better decisions when choosing premiums due to their in-depth knowledge of different business industries. They can also more easily access lower premiums in specialised markets that might not be open to individual customers. Overall, an insurance specialist will save you money and time throughout the process of choosing insurance premiums.
To make better financial decisions in terms of insurance premiums, consult an insurance specialist today. You will be glad you did.
General Advice Warning
The information provided in this blog is to be regarded as general advice. We recommend that you consider the suitability of this information, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider relevant product disclosure statement(s) before making any decision to purchase this type of financial product.
