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Why Does My Premium Keep Increasing if I Have No Claims?

April 29, 2015

Insurance is defined as: The equitable transfer of risk of loss from one entity to another in exchange for payment.

You faithfully make those payments and haven’t suffered any losses so why does your annual premium rise instead of fall?

There are a variety of actuarial calculations that are taken into account when you are given a proposal for insurance.

  • The underwriter will look at both your company’s history of risk as well as your industry as a whole. If this group as a whole has suffered catastrophic losses, the insurance companies will require greater premiums to ensure against the probability that you will have a loss in the coming year. For instance, a roofing contractor has a much higher Workers’ Comp rate than a retail store – the chance of a roofer getting injured is higher, there will be more claims and the cost of those claims will be higher.  Make sense?
  • The Great Recession  – something we are still battling –  has caused premiums to rise as well. Many businesses Highway Signpost Business Intelligenceclosed or elected to not insure themselves thus lowering the amount of monies collected by insurers. The low interest rates have decreased the growth of both their investments and of the reinsurance companies. This has left less money to pay out claims leading to large underwriting losses in 2011 and 2012. Insurance companies had significant rate increases in 2013 and 2014 to make up for the losses, but now see the trend of rising rates leveling off in 2015.
  • After many scandals and large lawsuits, many insurers have chosen not to assume certain risks anymore since the probability of large claims is inevitable. With less competition to vie for your premium companies can charge you more money. This is a simple supply and demand.

What can you to manage your insurance costs?

  • Training programs for employees not just on safety, but on customer service and in-house procedures will help with Workers’ Compensation and E&O claims. Document theses training sessions by having employees sign an attendance sheet and include a short summary of what topic they are learning.
  • If an incident occurs, document everything as thoroughly as possible and report it to your broker immediately. Even if a claim doesn’t arise, you want to make sure you are covered.
  • Ensure that your schedule of equipment is up to date so you aren’t paying for items that you no longer own.
  • Review the payroll classifications on your Workers’ Comp to see if there have been changes.
  • Consider a higher deductible.

Meet with your agent and review your policy in detail every year. Business needs change constantly and you may find that there are coverages you are paying for that are no longer applicable. Even more importantly, you will want to make sure you are protecting yourself against any new exposures!

At Founders, we are always happy to review your coverages and counsel you on best practices.  Have a question?  Don’t hesitate to give us a call!  860-482-3506

Nancy Swenson

Commercial Lines Account Manager

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