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Why You’re Not Happy With Your Commercial Insurance And What To Do About It

By | Business Insurance | No Comments

A superb idea is born. An entrepreneur starts working on it. They develop a product framework that is predicted to take the market by storm.

They even approach potential investors with the concept. Everyone loves it, and consequently inject sufficient funding into the startup.

Then the project moves to the testing phase. Prospective customers seemingly love the product, and can’t wait until the official launch.

So far so good.

And boom! All systems go. They launch the small business to a reasonably warm reception.

The beginning is quite slow and proves to be fairly challenging. But, thanks to persistent marketing, the business later picks up. And it begins generating positive ROI at a steady rate.

At such a promising pace, it would be a shame to get overwhelmed and lose big. So the business owners go for the best possible solution. They rush to purchase commercial insurance.

They pick what seems like a comprehensive coverage. But no one has the time to read all the policies in detail. Because running a business is too burdensome, right?

So business costs have now extended to include the consequent insurance premiums. But that’s understandable since its assets and resources are well-protected, right?

And the small enterprise continues growing exponentially. It’s now progressively approaching the mid-sized business bracket.

Even large, established brands that preceded in that market space are not safe anymore. Competition is here, and it’s catching up fast.

Suddenly, the worst imaginable thing happens. Or so they assume.

Just as the business was planning to expand, thugs break in and steal critical business hardware.

Pretty devastating, to say the least. But you know what? At least the company had insurance against hardware theft.

So they file a claim with their insurance company. The process proves to be cumbersome at first. But they secure the services of a reputable independent insurance agency.

Everything then hastens and the business is ultimately compensated for hardware theft. But, unfortunately, not for losses incurred during the entire post-theft period.

Quite surprising, considering the premiums had been increasing progressively after every 12 months. That’s bad enough.

But here’s the kicker. The compensation only covers hardware they started out with. Nothing on subsequent upgrades and new acquisitions.

Nevertheless, instead of crying over spilt milk, the enterprise restrategizes for a second relaunch. It even secures additional funding from the initial batch of investors who had witnessed its growth.

Now, they say that when it rains it pours. Just when people thought the situation couldn’t get any worse, a hurricane strikes. And it sweeps off all the newly acquired equipment.

The insurance company then shows a clause that essentially invalidates a second immediate compensation. So basically, there’s nothing to fall back on now.

As if that’s not enough, investors are hearing none of the explanatory tales. In fact, they come with guns blazing to demand their money.

Too bad. An undoubtedly well-performing business now reduced to ashes.

Does this situation sound familiar?

Liability Risks For Small Businesses in Michigan

Well, that’s more or less the same case for a fraction of the 456 Michigan-based businesses that filed for bankruptcy in 2017.

Source: Statista

From the graph, it’s evident that the business environment is steadily improving in Michigan. But both startups and established businesses are still facing a myriad of liability risks.

As a matter of fact, the current favorable business policies are now exceedingly encouraging even small businesses to settle for higher risks.

That partly explains why in Detroit alone, the number of retailers filing for bankruptcy is hitting its highest levels since 2008 and 2009.

Of course, we encourage business owners to step up their overall risk management. But that’s one part of the problem.

The other lies with commercial insurance providers. Even with small businesses paying an average of $1,283 annually for $1-$2 million commercial general liability insurance, bankruptcy is still a real possibility.

Source: Insureon

And that’s barely a fraction of it. The threat is substantially higher for businesses with additional risks like auto liabilities.

And you know the worst bit about all this? Surprisingly, even after paying your premiums faithfully, there’s no assurance of adequate compensation.

All things considered, it all boils down to your insurance provider’s professionalism. Is the company committed to customer service?

Interestingly, according to the J.D Power U.S. Small Commercial Insurance Study, small enterprises have the lowest average customer satisfaction rates. The overall rate only increased by 2 points between 2016 and 2017 to settle at 82.5%.

From the study, it’s evident that the bulk of them are fairly happy. The rest quoted varying reasons why they are not happy with their policies.

In a nutshell, this sheds light on general customer perception. But here’s the problem. It’s still insufficient to analyze the corresponding rates of resolution in case of actual liability occurrences.

A 2015 survey by Marsh revealed that only a quarter of business have tested possible insurance response. The study might have only focused on commercial property insurance, but it largely exposed the general industry preparedness.

So what does all this mean?

Ironically, even the bulk of satisfied businesses have no idea how their respective policies will respond to protect them. You may be satisfied, but not actually happy and assured of adequate protection.

Now hold it right there. How do you even establish that you’re not happy with your commercial insurance? And which is the best possible resultant mitigation?
It really is pretty simple and straightforward. So let’s fire away….

Why You’re Not Happy With Your Commercial Insurance

1. Your Commercial Insurance Policies Are Static

Today’s micro-enterprises are tomorrow’s industry leaders. Even the largest established businesses had to start small, right?

Now, this is the basic concept behind commercial growth. That’s why we even engage in business in the first place.

An overwhelming 99.6% of businesses registered in Michigan are small enterprises. Their combined growth in 2016 saw the state economy improve by 2.3%. Almost double the corresponding national rate of 1.3%.

Source: SBA

Unfortunately, this trend not that obvious to all commercial insurance companies.
Like in our case above, some policies are not flexible enough to accommodate any form of growth. And the providers might not even revise them during insurance renewal. They only remember to increase the premium rates.

If this applies to you, you might be in for a rude shock when you eventually file a claim.

2. You’re Paying Too Much For Commercial Coverage

Most premiums for general liability commercial insurance fall within the $300-$1000 bracket. As we’ve already established, the bulk of small businesses are paying between $400 and $600 for $1-2 Million worth of coverage.

12.1% of similar enterprises are paying more than $1,000. Some are even going as high as $5000.

Now combine that with Michigan’s average auto insurance cost of $2,484. And you’ll get a figure that could potentially eat into your business capital.

Coming to think of it, insurance is still a form of business. You bet that your provider would never hesitate to proceed if they had a way of generating additional income. And that includes capitalizing on your enterprise.

So make a habit of comparing your rates with what other similar businesses are paying.

3. You’re Working With A Direct Agent

Admit it. Unless you’re in the insurance space, you possibly know very little about commercial policies.

To be fair, this is an increasingly complicated subject. It might take years to fully comprehend how everything works. And you’d be right to assume that you’ll probably never get time for all that.

Even if you wanted to, you’re too busy running your business. And this is a fact that’s well-known by more than 1 million direct insurance agents in the U.S.

Source: Statista

So, of course, they’ll receive you with open arms. Then take advantage of your unfamiliarity with critical insurance policies.

Here’s the thing. They work in conjunction with insurance providers. Consequently, every dollar they secure from you translates to more commission.

That’s why they are always readily available to insurance seekers. As a matter of fact, such interactions, according to J.D. Power, have been the principal drivers of customer satisfaction.

Quite ironic, to say the least. Because in the end, the captive agents will only safeguard their interests, while yours come last.

4. Your Insurance Policy Comes With Unfavorable Exclusions

Conservatively, fraud is stealing $80 billion every 12 months from insurance companies. But, oddly enough, this is barely shaking the industry. Providers are still posting significant profits even after settling claims.

So what’s the catch?

To protect their income, insurance companies are known to employ a wide range of tricks. One of the most predominant ones is making exclusions for rather common liabilities.

In essence, your commercial insurance policy might seem fairly solid and adequate. But a cleverly-hidden clause might be revealed when you file a claim.

Within the fine print, you might discover a major exclusion within your policy. It might be small but basically disqualifies your business from the claim.

Dirty by all means, but fairly acceptable in the industry. That’s why this practice continues to attract increased controversy, especially in the medical field.

According to a survey conducted by the Doctor-Patient Rights Project, nearly 24% of patients are denied treatment. Majorly due to complications arising from such circumstances in the course of liability claims.

5. The Insurance Company Does Not Understand Your Business

The J.D. Power report further revealed that small business customers overwhelmingly prefer phone and web contact channels. While 9% of them prefer mobile apps; email/text is used by 39%; and website contact is popular among 57%.

Agent in-person, on the other hand, was combined phone contact to add up to 61%.
The bottom line here is obviously convenience. The most widely used methods are fast and pleasantly straightforward. We’ll give them that.

But, conversely, they have a major weakness. Agents are now rarely visiting businesses they insure. Your business is basically bundled with others that are seemingly alike.
As a result, some unique details might be ignored. And a number of them could be quite critical in proving lower risk levels. Which would, in turn, reduce overall premiums.

What To Do About All These

These are all very critical pointers. But, admittedly, we’ve barely scratched the surface. There are many other conditions that might be applicable to individual businesses.

Now, each problem has its unique mitigation procedure. But, it would probably take multiple book volumes to cover all possible solutions.

I’ll tell what though. There’s one method that principally applies to all of them, regardless of your specific problem.

And here’s the secret. Simply consult a reputable independent insurance agency. And you’ll definitely find its agents’ extensive professional knowledge extremely helpful.

Conclusion

To recap:

● 456 Michigan-based businesses filed for bankruptcy in 2017.

● In Detroit alone, the number of retailers filing for bankruptcy is hitting its highest levels since 2008 and 2009.

● Even with small businesses paying an average of $1,283 annually for $1-$2 million commercial general liability insurance, bankruptcy is still a real possibility.

● According to the J.D Power U.S. Small Commercial Insurance Study, small enterprises have the lowest average customer satisfaction rates.

● A 2015 survey by Marsh revealed that only a quarter of business have tested possible subsequent insurance response.

● An overwhelming 99.6% of businesses registered in Michigan are small enterprises.

● Some policies are not flexible enough to accommodate any form of growth. And the providers might not even revise them during insurance renewal.

● 12.1% of small enterprises are paying more than $1,000 for insurance. Some are even going as high as $5000.

● In the end, the captive agents will only safeguard their interests, while yours come last.

● Within the fine print, you might discover a major exclusion within your policy. It might be small but basically disqualifies your business from the claim.

● Agents are now rarely visiting businesses they insure. Your business is basically bundled with others that are seemingly alike.

● Simply consult a reputable independent insurance agency. And you’ll definitely find its agents’ extensive professional knowledge extremely helpful.

We love helping out. And we’d definitely like to hear your experience with this type of insurance. So let’s start with…How did you find your commercial insurance?

Commercial Insurance Explained in 2018

By | Business Insurance | No Comments

Business insurance is going up and we are here to explain why and potentially how much.

“Wait till legislation lands on insurance companies and the market will turn”

“Improved auto technology and infrastructure will reduce accidents and corresponding insurance rates”

“Increased availability of medical services and cheaper commercial cars will make insurance cheaper”

These have been sentiments on one side of the spectrum for quite some time now.

We all know commercial auto insurance policies have been steadily climbing for a couple of years. And sadly, the trend doesn’t seem to be slowing down.

Since consumers have been complaining, insurance providers must be having a ball, right? Indications show that they are possibly laughing all the way to the bank.

After all, we haven’t seen many claims lately, right?
Interestingly, sentiments have been the same for commercial insurance providers. They are also complaining about current premium rates.

According to a report released by Fitch Ratings Inc, the commercial auto sector has been recording losses since 2010.

2016 was particularly poor, with the worst underwriting performance since 2001. Evidently, insurance companies are not doing as well as we thought

Commercial Auto Insurance Providers’ Losses. Source: Trucks

While we acknowledge that the bulk of providers have recorded losses, we can’t deny one simple fact. Commercial vehicles are progressively becoming safer.

That is the bottom line. Elemental improvements like lap belts, padded dashboards, and breakaway steering wheels paved the way for advanced safety features.

Modern trucks are now coming with auto-braking systems, stability control, head-protecting airbags, three-point harnesses, and anti-locking brakes.

As a matter of fact, according to recent crash tests, one fleet was able to use collision-mitigation technology to reduce rear-end crashes by about 70%.

Additionally, they established that the tech further minimized the severity of the remaining 30% of crashes.

Safety Ratings of Selected Trucks. Source: TFLTruck

Well, of course, these commercial vehicles may still not be accident-proof, but crash tests have proven that they are indeed safer.

And since insurance providers have always kept a close eye to such developments, consumers continue to expect substantially lower pricing.

All things considered, there seems to be a disconnect. Commercial vehicles are now safer than ever before. But insurance pricing is still rising owing to increased losses by providers.

So, will this continue in 2018? Or will developing trends, coupled with evolving legislations make commercial insurance cheaper?
To demystify this whole issue, let’s look at the current position of the industry. Then subsequently establish factors that will be affecting pricing in 2018.

The Commercial Insurance Industry Today

The 20th Century saw increased development of road networks and overall infrastructure in the U.S.

The last quarter was particularly interesting, as it started a transportation trend that persisted for a couple of years.

Americans were making good money and buying vehicles, plus gas prices were relatively low.

Consequently, the number of miles traveled kept rising every year until 2008.
Then the great recession came with a wide range of consequences, among them reduced travel.

With funds not readily available in the economy, commercial trucks were not moving around as they previously did.

And this outlasted the recession until 2012 when mileage started rising again.
The growth has been exponential since then, and it’s seemingly not slowing down anytime soon.

Total Miles Driven in the USA. Source: Verisk

In 2016 alone, Americans drove a total of 3.1 trillion miles thanks to gas prices decrease and improved economy.

Commercial vehicles continue to contribute substantially to these figures.
Under normal circumstances, an average commercial driver moves around way more than his private counterpart.

Now review that from a provider’s perspective. More mileage translates to increased risk of accidents and mechanical failure.

Eventually, they end up offsetting this by periodically revising and increasing standard commercial premiums.

Speaking of auto accidents, it’s indeed true that manufacturers continue to produce safer commercial vehicles.

But, look at the bottom line again – With mileage still rising, it’s expected that the number of accidents will record a similar trend.

Additionally, even with current traffic legislation, Americans have never been known to be the most careful drivers.

True to this, accident frequency is currently at its highest in the U.S. In 2015 alone, there were 4,311 large trucks and bus accidents across the country.

Compared to previous years, that translates to 26% increase since 2009.

Accident Frequency. Source Verisk

According to National Safety Council estimates released in 2017, the year 2016 was the deadliest yet in a decade. As many as 40,000 people lost their lives, marking a 6% rise from 2015.

Now let’s analyze that against miles traveled. From 2014 to 2015, the number of accident fatalities per 100 million miles traveled by buses and large trucks increased by 1.7%.

It’s evident that an increase in mileage translates to a corresponding growth in the number of accidents and deaths.

All things considered- administrative expenses, property damage, medical expenses, and losses in productivity and corresponding wages- the cost of auto accidents in 2016 was $432 million.

While fatalities rose by 6% compared to the previous year, financial losses marked a double increase of 12%.

Of course, such a trend never goes down well with insurance companies. And that’s one more reason why 2017 saw an increase in auto insurance premiums across the board.

But despite that, commercial auto insurance providers have hit depths the industry hasn’t experienced in 15 years.

By the end of 2016, the commercial auto combined ratio stood at 110.4, recording a 1.6% rise from 2015.

When the industry thought things couldn’t get worse, 2016 was marked by an even lower underwriting performance.

So, considering how recent years have gone down, can we expect a bright spot for both commercial insurance providers and consumers in 2018?

Commercial Insurance Pricing Outlook in 2018

If you feel commercial insurance rates have been unfair in 2015, through 2016 and 2017, there still isn’t much good news for you in 2018.
Yeah, of course, insurance providers like to market themselves as “protectors” of liabilities.

They always seem like they are willing to sacrifice their resources for your benefit.

But, at the end of the day, they are all businesses, not charities. And the principle mantra for any business is profits.

So, unless commercial vehicles drastically reduce their travel distances and maniac drivers suddenly reform, expect to pay a little more for your commercial auto insurance over the next 12 months.

The rates all through 2018 will be determined the recent proportions of expense to revenue, commonly referred to a “combined loss ratio”. Usually, it’s all good for a company until the ratio hits 100%.

At that stage, the insurance provider is breaking even. Anything above that, therefore, signifies losses.

The company is essentially losing way more than it’s making from the premiums paid.

Let’s look at recent ratios across the top 10 auto insurance companies.

Top Insurance Companies Compressed Loss Ratios. Source: ValuePenguin

Now, please note that these are supposed to be the crème de la crème of insurance businesses.

It’s where you’d most probably place your money if you thought about investing in auto insurance.

Going by past trends, they are the most profitable in this sector.

But, surprisingly, only two of them made a profit in 2016- and just barely. Cumulatively, they all add up to an average compressed loss ratio of 107.1%.

Makes you wonder where other smaller companies lie. That’s really bad not just for auto insurance providers, but also consumers- including commercial clients.

Some people have argued that they should recover by only penalizing commercial drivers who’ve been in accidents in the past.

Unfortunately, it’s not that simple. The situation is so dire that your rates will still go up even if you’ve never actually been a mile away from an accident.

That’s the only way they’ll be able to progressively bring their ratio back below 100%.

If the current situation was anything like how it was back in 2010, we’d be dealing with different projections. 2010 was the exact opposite.
8 of the leading auto insurance companies were operating within comfortable profit margins.

Only 2 of them recorded combined loss ratios of over 100%, consequently marking an average of 99.7%.

Recent Underwriting Profit Margins. Source: ValuePengiun

Auto-insurance companies, including commercial providers, have been recording losses for the past six years. Even more surprisingly, they’ve lost more money every time they review their rates against losses.

That said, 2018 will see commercial insurance providers not just bump their premiums up.

They’ll possibly do so with the highest margin yet. Only the long-term future could be holding promising prospects for commercial auto insurance clients.

Long-Term Commercial Insurance Outlook

It’s difficult to accurately predict the future of commercial auto insurance.

Expert projections on patterns are still a bit sketchy.

The price of oil could continue falling as more people switch to electronic commercial vehicles. The latter is especially expected to be significantly cheaper to acquire and maintain.

Over time, that translates to more commercial drivers and higher chances of accidents. As we’ve seen in the past, this could negatively affect commercial insurance pricing.

On the bright side, however, there is little doubt that the adoption of autonomous vehicles will gradually reduce the average premiums.

According to research by Stevens Institute of Technology in collaboration with Accenture, almost 10% of U.S registered vehicles will be fully autonomous by 2035.

The rest, of course, will mostly be semi-autonomous, with advanced safety features. Even the heaviest commercial vehicles will have short braking distances, and crash-avoidance artificial intelligence.

Since as many as 95% of traffic accidents are attributed to human error, such trends could trigger a major shift in the entire auto industry.

The severity of accidents will also drop, and competition between insurance providers will peak as numbers of specialized companies rise.

Ultimately, we may see a significant drop in commercial premiums, as companies begin adjusting them according to actual risks.

As a matter of fact, this may start happening as soon as 2026. That’s when large numbers of autonomous cars will begin hitting the streets.

Conclusion

To recap:
● According to a report released by Fitch Ratings Inc, the commercial auto sector has been recording losses since 2010. 2016 was particularly poor, with the worst underwriting performance since 2001.

● Commercial vehicles are progressively becoming safer. But insurance pricing is still rising owing to increased losses by providers.

● According to recent crash tests, one fleet was able to use collision-mitigation technology to reduce rear-end crashes by about 70%. They established that the tech further minimized the severity of the remaining 30% of crashes.

● The number of miles traveled kept rising every year until 2008.

● This outlasted recession until 2012 when mileage started rising again. The growth has been exponential since then.

● In 2016 alone, Americans drove a total of 3.1 trillion miles.

● With mileage still rising, it’s expected that the number of accidents will record a similar trend.

● In 2015 alone, there were 4,311 large trucks and bus accidents across the country. Compared to previous years, that translates to 26% increase since 2009.

● As many as 40,000 people lost their lives in 2016, marking a 6% rise from 2015.

● From 2014 to 2015, the number of accident fatalities per 100 million miles traveled by buses and large trucks increased by 1.7%.

● The cost of auto accidents in 2016 was $432 million.

● By the end of 2016, the commercial auto combined ratio stood at 110.4.

● Top 10 auto insurance providers added up to an average compressed loss ratio of 107.1% in 2016.

● The situation is so dire that your rates will still go up even if you’ve never actually been in an accident.

● There is little doubt that the adoption of autonomous vehicles will gradually reduce the average premiums.

● Almost 10% of U.S registered vehicles will be fully autonomous by 2035.

● Since as many as 95% of traffic accidents are attributed to human error, such trends could trigger a major shift in the entire auto industry.

● We may see a significant drop in commercial premiums, as companies begin adjusting them according to actual risks.

Going by these facts, what do you assume you’ll pay your commercial auto insurance provider over the next 12 months?

Desk with stick notes, scissors, iPhone, and pencils

Insuring your business and it’s vehicles.

By | Auto Insurance, Business Insurance

Whether you run a small business out of your home or you are a partner in a larger corporation, understanding the importance of both business and commercial auto insurance is essential. Many entrepreneurs sell household and beauty products through home sales and parties using their vehicles. Large numbers of handymen work as independent contractors building decks, fixing plumbing and HVAC, and even detailing cars. Each of these people have one important aspect in common – the need for good insurance on their transport vehicles.


Business Insurance Coverage

If you transport products or equipment for your business in a vehicle used mainly for this purpose – you need to have adequate business auto coverage. If you or one of your employees were involved in an accident and the products or equipment were damaged – your personal auto insurance would not cover the claim. When you are comparing quotes for business insurance, you need to think about what would happen if the products you sell, or the tools you use in your trade were damaged or stolen. How would this affect your business and your ability to pay the bills? A Business insurance plan will take care of these losses and take care of lost income while you are replacing items.

Commercial Auto Insurance

Automobiles used to transport items, equipment, or people for a business need special insurance. Businesses incur a larger liability in the event of an accident, and a personal auto policy would not be enough to take care of expenses. When talking with an agent about the different types of commercial auto coverage for your transport cars, think about how many different people drive the vehicles. How many miles are driven and in what type of traffic and weather conditions? What is the value of the goods and equipment being transported? When choosing coverage, you need to make sure you have enough protection to take care of fixing the vehicle, medical expenses for the driver and passengers, and replacement of business items in the car or truck.

Smart business owners will speak with a knowledgeable insurance agent about both business and commercial auto insurance needs. Understanding the differences and making sure you have enough coverage will ensure your business stays on track even if an accident occurs. Speak with one of our agents today.