Insurance price increases might not be welcome news for small business owners who continue to be sour on the economy—88% think the economy is on the wrong track, according to a recent U.S. Chamber of Commerce Small Business Outlook Survey. But a bigger coverage price tag is the news independent agents will have to deliver to small business clients this year.
Industry watchers say they expect 2013 to look a lot like 2012 in terms of businessowners policy pricing increases.
“It’s well documented that BOPs are going up single digit [percentages] to a bit higher,” says Benedikt Sander, senior vice president of Liberty Mutual Commercial Insurance. “It’s a broad trend across the industry, and I don’t think it is going to recede.”
Michael Keane, president of small commercial at The Hanover Insurance Group, agrees and says he expects price increases to continue through the end of the year, driven both by geography and by line of business performance.
“Some companies will take a broad-based approach to price increases not accounting for good performance by class, but there will be some carriers that will take a more reasoned approach,” he says.
Dan Gaynor, head of commercial lines for The Main Street America Group, says for some carriers, there might be reinsurance increases due to the number of catastrophes in 2012.
“It will be interesting to see what effect [Sandy] has on the Jan. 1 reinsurance renewals,” he adds.
“BOPs are a fairly stable product,” Sander says. “I think you are going to see coverage experimentation. Companies will continue to play with industry specific bundles and professional services bundles and allow more risks to be served with a BOP.”
BOPs continue to be a product that the agents really like because they have a high degree of automation, enabling agents to handle customer needs quickly, Sander notes.
“That is why the market is trying to serve more risks under BOPs [and] push the automation higher to meet agencies’ business customers’ expectations,” he says.
Keane says Hanover is always looking at emerging classes for BOPs, pointing specifically to the mobile food service industry and independent distributors as two active areas.
“For independent distributors, an example would be a bread manufacturer’s delivery force,” he says. “It used to be that every manufacturer would have its own delivery force. Now a lot of that business is being subcontracted out, and needs to be insured.”
On the Horizon
Gaynor points to technology and the home health care and medical industries as sectors of small business growth, and says agents should expect more product development in those areas.
“And when we talk business owners, one of the emerging issues is fracking,” Gaynor says. “What are the true exposures there? It will be key for the contractors business in the next few years. How can we and other companies successfully capitalize [on this need] and stay within [the] small business framework?”
Katie Butler is IA editor in chief.