Commercial Insurance in the Modern Age

by Madeleine Maccar | May 2, 2022
Commercial Insurance in the Modern Age

As the region’s commercial, retail and other enterprise ventures cautiously return to operating more like they did pre-pandemic, things still aren’t quite business as usual—and, perhaps, might never return to the way things were. While it’s tempting to proceed like nothing’s different after two turbulent years, every commercial operation throwing open its doors in 2022 needs to consider COVID’s lessons and be aware that they’re operating in a whole new world. 

Among the vast changes the pandemic ushered in were those short-term solutions that eventually become part of the new normal. Many found that offerings like virtual banking and working from home became their preferred way of doing business, either wholly embracing them or developing a hybrid approach that appeals to traditional expectations and modern benefits alike. 

But adapting accordingly isn’t just tweaking a business model here and adding some new services there—after all, staying relevant in an ever-changing business landscape means that companies need to evolve right along with it. To do so optimally, business owners and decision-makers need to learn how to navigate an entirely new field of play, which also comes with the new risks and potential for liability exposure that commercial insurance professionals are working to educate their clients about.

“Businesses are in such an awkward place right now,” notes Matthew Peterson, president of Mills Insurance Group. “The positive is that we’re seeing a lot of companies come back from that frozen state, and as that happens, they’re almost starting over or revving back up. … [But] that reemergence has its own set of challenges.”

Peterson adds that those concerns range from revisiting the routine basics of running a business, like payroll being both updated and recorded correctly, to the thoroughly modern concerns of figuring out if a workforce will remain remote, adopt a hybrid approach or return in full force to brick-and-mortar locations. 

With remote work becoming less of a perk and more of an expectation for retaining top talent, technology remains a crucial link seamlessly connecting those far-flung home offices. But a growing reliance on tech solutions beyond that connectivity has exposed how vulnerable every organization and their sensitive information is to hackers, phishing schemes, ransomware and other malicious activity, especially since those bad actors waiting to hook another victim always seem to be a few steps ahead of everyone else. 

Insurance carriers can craft policies covering known threats but it’s almost impossible to predict how companies will be digitally hobbled in the future. That’s why experts in the commercial insurance space are unanimously and emphatically telling their clients how important it is to safeguard against those all-but-inevitable attacks with cybersecurity insurance, a kind of expanded coverage they’ve never before recommended with such vehemence. 

“Cyber insurance is no longer a want, but a need,” confirms Tom Narolewski, executive vice president of AssuredPartners, adding that it’s very much a situation where an ounce of prevention is worth a pound of cure. “The risk of a cyberattack is actually changing faster than insurance policies can keep up with it. One recommendation we make is that now is the time to buy it because, especially if you have a cyber loss, it’s so much easier to renew a policy than it is to write a new one.” 

Comprehensive cyber insurance will absorb the blow of a breach involving sensitive client information, such as Social Security numbers, credit card information, passwords, personal account details and more. It can also cover the associated costs of notifying customers whose data have been compromised, any interruptions in business, replacing bricked equipment, or even the financial losses from making good-faith payments to convincing but ultimately fraudulent parties. Given its recognized importance as a crucial commercial safeguard, many general packages have started offering adequate baseline cybersecurity insurance. 

“A lot of your Main Street businesses have sort of an all-encompassing business owner’s policy, or BOP, which includes a lot of coverages that are typical for a business—you can tailor it, but a lot are included to cover all the bases, even on a minor basis,” says Mike Matlack, owner of Matlack Insurance. “Fortunately, a lot of companies are now automatically offering or including some cyber coverage in their business owner’s policy. It’s not necessarily as broad as if you bought a standalone cyber policy, but at least you have some coverage.” 

Cyber insurance isn’t the only kind of extended coverage area experts are suggesting to their clients. Employment practices liability insurance—which covers the defense costs and damages related to an array of employee-related allegations like wrongful termination, discrimination, harassment or retaliation—is another coverage recommendation that has become imperative in these litigious times. 

Narolewski points out that “in this environment where we’re seeing a lot of delinquent bills and no-pay bills,” exploring trade credit insurance to protect against vendors’ tardy payments is also a suggestion he’s making more and more often.

Peterson adds that insurance covering weather-related losses and damage from the elements is crucial, though “a big challenge right now” is accounting for the rapidly rising cost of the labor and materials needed to make any repairs born of natural disasters. 

“Anything coastal is a big deal with insurance companies,” he explains. “If you have a building within a certain distance to the coast that could experience wind damage, make sure your carrier understands and is insuring for winds and flood, and that your agent is able to obtain those coverages. There’s a lot of scrutiny on property value with the rising cost of lumber, steel and getting contractors to be there to fix it back up.” 

Like everything else, a clogged supply chain and material shortages’ skyrocketing costs are impacting the insurance world and its rates. It’s not only the costs of repairs and limited availability of materials but also how quickly and unpredictably those prices fluctuate, as well as the ripple effects influencing other areas of coverage. Company cars and commercial vehicles, for example, are becoming much more expensive to insure since many replacement parts are hard to come by and the tiny, complex computers incorporated into things like mirrors and bumpers are turning seemingly minor scrape-ups into costly collisions. 

“As the costs of things go up, that’s going to be reflected in the cost of the insurance,” Matlack observes. “For instance, with cars today, they’ve got backup cameras, they have all kinds of sensors, the cars stop themselves if you’re backing up and going to hit somebody—and it’s all expensive. Years ago, you’d have a little fender-bender and it was no more than getting your plastic bumper replaced and repainted and it’s $1,000. That’s not true today: You have a minor accident and you have to replace the bumper, the two cameras in the bumper, the airbags might go off, and it ends up being this huge bill … and because of supply-chain issues, if your car is not drivable, it could be sitting there for eight weeks until the parts and chips come in—and that’s if the car isn’t totaled because of all the equipment in it that has to be replaced.” 

Despite expensive vehicular gadgets and a critical need for cybersecurity both contributing to an uptick in insurance costs, the prevailing opinion is that rapidly advancing technology has actually made it easier for policyholders to receive payouts from their insurers. From managing policies online in order to avoid the inadvertent cancellations that come from postal delays to being able to make a claim or document damage with photos right on your phone, experts say there’s plenty to be optimistic about in an industry with a bad rap. 

“There’s no good claim experience: It’s feeling like you lost something and wondering if you’re truly going to be made whole again,” says Peterson. “But I don’t see that the battles have become so adversarial: I think the insurance world has actually done a good job of speeding up the process, even to the point of payment. … Insurance gets a bad reputation but there are really good parts of it and it’s the people behind the companies that are really worth being optimistic about, like the underwriter who’s working on Christmas Eve trying to help their client.” 

Still, it is admittedly getting more difficult to secure affordable, comprehensive coverage. To counteract that, industry professionals advise that business owners should get their houses in order and showcase all the things they’re doing right, which can be beneficial in overcoming those hurdles. 

“It’s getting harder to place a lot of risks, and carriers are getting a little more selective,” says Narolewski. “If you do all the right things, you have all your safety and loss-control programs, you run your business properly, you become more attractive to carriers and it will be easier for you to get competitive rates going forward. Your best-in-class type of operations really benefit in this environment because there’s a lot more options open to them. If you can strive to be that operation, I think it really pays dividends.” 

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Author: Madeleine Maccar

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