VOL. 9 | NO. 42 | Saturday, October 15, 2016
Businesses Can Expect to Pay More For Insurance Products in 2017
By Michael Waddell
Many businesses are feeling the sting of increasing medical insurance costs, while premiums for other types of business insurance have remained stable over the past year. But that’s all likely to change in the next year, as rates are expected to rise.
Steve Peay and Cindi Gresham are senior vice president and president, respectively, of Boyle Insurance Agency. Gresham says cyber liability for career professionals is now common, but the risk of fraud continues to grow rapidly.
(Memphis News/Andrew J. Breig)
The types of insurance geared toward businesses also has risen in recent years, with policies such as cyber liability and employee dishonesty joining more traditional core components of commercial insurance packages, such as general and product liability, property and tenant insurance, vehicle insurance and workers’ compensation insurance.
“It’s a completely different world from what it was 15 years ago,” said Boyle Insurance Agency Inc. senior vice president Steve Peay, citing new types of coverage like cyber liability, employee theft, dishonesty and computer fraud. “Everything is constantly changing today. It’s not as simple as it used to be, but it’s evolved for the better.”
Peay classifies the current insurance market conditions as soft, with insurance readily available and competition high among agencies. Prices are lower and have remained low for a long time, similar to interest rates being low.
“For the last year rates have been fairly flat, from flat to 5 percent,” said Brad Smith, president of Smith-Berclair Insurance, who points out that insurance companies now have a lot more data at their fingertips, so they know more specifically where losses are coming from. “We’re seeing commercial auto on the rise faster than anything else right now.”
One disturbing trend Smith has seen lately is more claims with employee dishonesty or stealing from their employer. He’s also concerned about the fact that the industry as a whole had a $1.5 billion underwriting loss for the first half of 2016, with half a billion dollars in losses due to catastrophes.
“It takes a little while for that to filter down, so I think we’re going to see rates harden or increase faster over the next 12 months or so as we go through this spell of catastrophes,” said Smith.
Cyber liability is the newest of the specialized coverages and is a huge hot-button topic for the industry right now.
“For most clients it’s not a matter of if, it’s a matter of when they’re going to be hit by something,” Smith said. The cost associated with notifying people whose information has been breached is where the real expense is. Cyber liability is being purchased by almost everybody, from a small-business shop to a larger retail operation.
Anyone that handles information or credit cards is in need of cyber insurance.
“In the cyber world, things are changing daily,” said Cindi Gresham, president of Boyle Insurance Agency. “In 10 years, they aren’t even sure if you will be able to buy cyber insurance because it’s changing so rapidly and there’s so much fraud and hacking going on.”
Professional liability coverage applies to doctors, lawyers, accountants, athletes, assisted-living homes, and skilled-care facilities such as nursing homes.
“Of course now with the baby boomers, we’re seeing a lot more of that kind of risk,” said Gresham.
The fact there aren’t a lot of new businesses right now has helped to keep prices under control, as competition has remained high among insurance companies.
“Small businesses are the heart of America, and every time you add to their insurance costs it‘s making the margins even smaller for them,” said Smith, who points out that rising health care insurance costs easily make up the highest percentage of insurance costs for employers. “We’re seeing companies that have had to cut back, lay off people, change people from full time to part time, or hire them as independent contractors – different things to try to control costs.”
Health care insurance costs are increasing as insurance companies absorb sizable losses associated with the high number of patient claims under the Tennessee Health Insurance Exchange. Coverages can include individual and group health plans, dental, life, disability, cancer and accident.
“Employers costs are definitely going up, though not at the pace of the individual plans,” said Steve Finnell, owner of Group Benefits LLC. “It’s chronically increasing.”
He recently had to find cost-saving solutions for a company with 250 employees that had large increases in health care insurance costs as a result of filing a number of large claims.
“There are some short-term fixes and long-term strategies that companies with more than 50 employees are implementing to try to arrest that increase. You aren’t going to keep it from increasing, you just have to moderate it,” said Finnell. “For companies with under 50 employees, there aren’t many options.”
For companies with more than 50 employees, he cites many ways to partially self-fund the benefits so employers have more control over both spending and benefits.
“In the last three or four years, there are now some very creative ways to minimize or cushion the volatility and it make things predictable,” said Finnell. “You lower your costs by lowering your claims, it’s that simple.”
Wellness programs continue to evolve to get employees healthier and lower costs, along with tobacco cessation programs and regular health screenings.