4 Factors That Cause Price Fluctuation in Business Insurance
You may (or you should) find yourself reviewing your insurance policies and asking yourself why is my business paying so much for our insurance policy? The correct answer is there are a number of factors that effect how the “insurance carriers” (i.e Travelers, Liberty Mutual, Berkshire Hathaway) decide to rate policies within niche industries. Before we dive into a real world example here are a few common examples of other factors that may be causing your insurance prices to fluctuate.
Amount of payroll your company spends (More payroll = more employees = more risk)
Increasing Sales (Higher sales = more risk)
Recent or past claims (more frequent claims means you are more likely to continuously have claims)
Changes in your industry that create more risk. (example below)
Case Study: Transportation Industry
Over the past 10 years the U.S. has seen an enormous rise in the transportation industry. Much of this can be allocated to the rise of delivery services such as Amazon, Walmart, and other companies offering 1-2 day delivery. So what does this have to do with the rising cost of insurance in the transportation industry? Because many companies like Amazon subcontract their deliveries to independent business owners, this has caused a massive explosion in the number of new companies dealing with parcel delivery (aka Transportation). The issue arises in the fact that many of these newly emerged companies are new to the industry. This leads to a lack of knowledge, experience, and safety protocols. The rates of claims among the industry as a whole has suffered because of this. Insurance carriers know this and until the claims become less frequent rates in the transportation industry will continue to climb.
