The property and casualty (P/C) insurance industry cycle is characterized by periods of soft market conditions in which premium rates are stable or falling and insurance is readily available, and by periods of hard market conditions, where rates rise, and coverage may be more difficult to place due to stringent underwriting. The previous couple of years have been somewhat challenging for both businesses and the insurance industry.
A convergence of factors has prompted insurance companies to reassess their positions in the market. The frequency and severity of claims, social inflation, the COVID-19 pandemic, medical inflation, increased cybercrime, the cost of reinsurance, and natural disasters have all fundamentally modified the insurance market as we know it.
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WHAT DOES THIS MEAN FOR INSURANCE BUYERS?
As 2022 ends and we welcome 2023, the insurance industry environment is expected to continue in a hard market cycle, but it might not be as arduous as the past two years. However, there are several exceptions to that statement. Now more than ever, it is essential for businesses to take a proactive approach to bolstering their risk management efforts and securing adequate insurance coverage. In other words, amid an insurance and risk environment with many unknowns, businesses should focus on addressing the factors they can influence.
To help you navigate the insurance market, you need an insurance professional who understands your car wash business, helps you plan for unique risks, and advocates on your behalf. Secondly, you need insurance professionals who can tell your story to insurance carriers in a way that will best position your business come renewal time. Third, you need to work with an insurance professional who understands the dynamics of the current insurance market cycle and how to navigate a hard market successfully. Lastly, you need an insurance professional who fully understands your industry, the dynamic insurance landscape, and how to provide targeted loss control solutions.
FACTORS THAT INFLUENCE YOUR INSURANCE RATES
The coverage you are seeking — The forms of insurance you are seeking, as well as the details of the coverage (e.g., limits of liability and value of insured property), will affect your insurance pricing.
The size of your business — As a general rule, the more employees your business has and the larger your revenue is, the more you will pay for your insurance.
The industry in which you operate — Certain industries carry more risk than others. In general, businesses in these sectors are more likely to file insurance claims. As a result, businesses involved in risky industries tend to, on average, pay more in insurance premiums.
The location of your business — The location of your business will also influence your commercial insurance rates. If your business is in an area prone to certain natural disasters, insurers may determine that your facility is more at risk for property damage. This increased risk will translate to higher insurance premiums.
Your claims history — Your business’s claims history, often referred to as your loss history, will also have an impact on insurance rates. If your business has an extensive claims history, then insurance carriers will 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.
Your risk management practices — Now more than ever, conducting a careful assessment of your business’s unique exposures and establishing effective, well-documented risk management practices can make your establishment more attractive to insurance carriers. After all, having a robust riskmanagement program in place reduces the likelihood of costly claims occurring, as well asminimizes the potential losses that your business could experience from an unexpected event.
Thankfully, businesses are not without recourse in the face of a hard market. Business owners who proactively address risk losses and manage exposures will be better prepared for a hardening market than those who do not.
Furthermore, those who educate themselves on the trends that influence their insurance will better understand what can be done to influence their insurance rates.
TIPS FOR INSURANCE BUYERS TO CONSIDER
Commercial Property Insurance
• Gather as much data as possible regarding your existing risk management techniques. Be sure to work with your insurance professionals to present loss control measures you have in place.
• Conduct a thorough inspection of both your commercial property and the surrounding area for specific risk management concerns. Implement additional mitigation measures as needed.
• Analyze your organization’s natural disaster exposures. If your commercial property is in an area prone to a specific catastrophe, implement mitigation and response measures (e.g., install storm shutters on windows to protect against hurricane damage or utilize fire-resistant roofing materials to protect against wildfire damage) to protect your property as much as possible.
• Develop a documented business continuity plan (BCP) that will help your organization remain operational and minimize damages in the event of an interruption. Test this BCP regularly with various possible scenarios. Make updates when necessary.
Address insurance carrier recommendations. Insurers will be looking at your loss control initiatives closely. Taking the appropriate steps to reduce your risks whenever possible can make your business more attractive to underwriters.
Commercial Auto – Garage Keepers Liability – Care, Custody, and Control
• Examine your loss control practices relative to your drivers. Enhance your driver safety programs by implementing or modifying safe driving and distracted driving policies.
• Assess the risks associated with offering delivery services and implement measures to minimize potential damages (e.g., driver training programs and safe delivery protocols).
• Prioritize organizational accident prevention initiatives and establish effective post-accident investigation protocols to prevent future collision liability.
• Recommendation for customers to sign a waiver before vehicle service begins.
Commercial General Liability
• Work with your insurance broker to understand key market changes affecting your rates and how to respond using loss control measures.
• Ensure your establishment has measures in place to reduce the potential for customer or visitor injuries (e.g., maintaining safe walking surfaces and promoting proper housekeeping).
• Refrain from acts of defamation, slander, and libel.
• Implement a customer complaint and incident investigation policy. Include photos and witness testimony when applicable.
Examine your general liability coverage with your insurance broker to ensure limits match up with your insurance needs.
Cyber Risk Liability
• Work with your insurance professional to understand the diverse types of cyber coverage available and secure a policy that suits your unique needs. Carefully determine whether your organization should purchase standalone cyber liability coverage.
• Take advantage of loss control services offered by insurance carriers to help strengthen your cybersecurity measures.
• Focus on employee training to prevent cybercrime from affecting your operations. Employees should be aware of the latest cyber threats and ways to prevent them from occurring.
• Keep organizational technology secure by utilizing a virtual private network, installing antivirus software, implementing a firewall, restricting employees’ administrative controls, and encrypting all sensitive data.
• Store backups of critical data in a secure, offline location to minimize losses in the event of a ransomware attack.
• Establish an effective, documented cyber incident response plan to remain operational and minimize damages in the event of a data breach or cyberattack. Test this plan regularly by running through various scenarios with staff. Make updates to the plan as needed.
Employment Practices Liability
• Review your employee handbook and related policies. Ensure you have all appropriate policies in place, including language on discrimination, harassment, and retaliation.
• Implement effective sexual harassment prevention measures (e.g., a zero-tolerance policy and a sexual harassment awareness program), reporting methods, and response protocols.
• Promote diversity, acceptance, and inclusion in the workplace through staff education and training. Take any accusations or reports of discrimination seriously.
• Document all evaluations, employee complaints, and situations that result in employee termination.
• State specific employee wage and hour compliance. Pay close attention to workplace issues that could lead to wage and hour complaints.
Review any state-specific legislation related to marijuana legalization. Consider revising procedures related to conducting workplace drug tests for marijuana or basing employment decisions on an employee’s marijuana usage, as these practices could potentially contribute to EPL claims.
Workers’ Compensation
• Implement safety and health programs to address common risks, especially when using a loss-sensitive workers’ compensation program. Conduct routine safety training.
• Reevaluate the effectiveness of pre-loss safety initiatives and post-loss claims handling procedures.
• Establish workplace wellness initiatives aimed at preventing or treating chronic health conditions and improving the overall wellbeing of your staff. These initiatives can help reduce the risk of your workforce developing comorbidities.
• Develop an effective return-to-work program that properly supports employees in the process of healing from a work-related illness or injury and resuming job duties following their recovery.
Moving Forward – Risk Management
It may seem as if the forces determining your insurance rates are beyond your control. But, as an insurance buyer, it is important to know how your premiums are calculated, what trends influence the market, and what you can do to get the best price.
Your claims history — which you can control — has an enormous impact on whether your rates go up or down. That is where implementing a solid risk management plan will help steer your pricing in a more favorable direction, both now and in future renewal periods.
There are six key components of a successful risk management strategy:
• Identify your business’s risks
• Establish loss control solutions for your unique risks
• Create a business continuity plan
• Build a company culture focused on safety
• Manage claims efficiently
• Monitor and evaluate
In addition to implementing the above risk management strategies, working alongside an experienced insurance broker who specializes in car wash business exposures is equally crucial. Qualified insurance professionals can help their clients analyze their business, understand their exposures, and establish a suite of customized insurance policies that function as a last line of defense against claims. A broker will also thoroughly explain your policies, notifying you of any additional considerations to keep in mind.
Remember, the insurance landscape is complex, and while the predictions are based on expert research, they are subject to change.
Source: Risk Management, Commercial Insurance Coverage (12/17/2021), P&C Market Outlook, Zywave, Inc.
Kimberly Grizzle, AAI is the director of marketing and business development for The Insurancenter, founded in 1895 as a full-service independent insurance agency.
A national car wash insurance program was introduced to the industry in 1986. The agency has remained the largest writer of car wash insurance for more than 36 years. For questions regarding this article or additional insurance information, Kimberly can be reached at info@theinsurancenter.com or visit www.carwashinsurance.com.