The cost of business insurance is always a thorn in the side of most business owners and corporate managers, especially when insurance is viewed as a necessary evil. Rates for most insurances tend to rise, partly to keep up with inflationary pressures affecting the cost of claim adjustments, or settlements. But not all the components of the typical commercial insurance program experience the same rate change trends.

As we illustrated in our previous quarterly newsletter, business auto insurance rates are showing an aggressive upward cost trend, with most insurers demanding annual increases ranging from 6% to 10%, irrespective of claims experience, or industry segments. The cost of claim settlements is rapidly rising, primarily as a result of costlier auto repairs and the prevailing legal environment.  But not all is bad news on the insurance rate front. Workers Compensation rates, for example, are trending lower in many states. Kansas and North Carolina, to name a few, have promulgated rate reductions averaging 6.4% and 17.2%, respectively, for the 2019 period, as recently reported by the industry journal Business Insurance. The Pennsylvania rating bureau, on the other hand, is expected to approve average rate reductions of 6%. Clearly, some classes of business operations will fare better than others, to account for the differences in exposure severity and differing cost of claims settlements across  the country.

Officials in several states are approving rates cuts as employers across the country report fewer claims and a reduction in loss severity. This favorable trend will likely continue next year, most experts agree. Although some experts remain cautiously optimistic, as doubts about the cost reductions of the healthcare component may not prove long lasting.

Jaime Tatosian, CPCU, ARM, RPLU
Client Account Manager, Charter Partners