Issue link: http://palletcentral.uberflip.com/i/1390499
36 PalletCentral • July-August 2021 palletcentral.com Shrinking Markets INSURANCE By Kevin Mershimer Property and casualty insurance for pallet/crating manufacturers. I n the past few years you have most likely seen either significant increases in your insurance premiums or your carrier has opted to non- renew your insurance thus forcing you to move your coverage to another carrier. There are many reasons for this and we will do our best to explain why and what you can do to help your business prepare for future changes. First let's talk casualty. Casualty insurance is auto, general liability and umbrella. For the most part, the general liability premiums are stable. Auto and umbrella are going up each year as much as 25% for those without claims and since they work with each other, it makes sense, but why are they going up? Two reasons: First of all, there are more claims. Even with state laws and firm company polices, there are more (frequency) auto claims from distracted driving than in past years. Secondly, the claims (even the simple rear endings) are more expensive. With cameras and airbag sensors, even minor damage (bumped at traffic light) is very costly to repair. Consider a side view mirror that a few years ago was $50 to replace now has a camera, heater, blind spot notification, lights, etc. We are also hearing more claims reaching the umbrella layers, which is causing many carriers to limit the size of umbrellas they are willing to offer, so be prepared to have a layered umbrella program. Let's talk property. What is a hard market: A hard market is when insurance premium rates are escalating and insurers are less likely to negotiate terms. Standards tighten and capacity is reduced for many carriers. This is caused by many factors; increasing losses to a niche industry (wood products), fewer carriers writing in that niche, poor investment results and increasing reinsurance costs. What we are seeing is a compilation of poor loss results, a hardening market and the effects of several carriers exiting the wood products insurance market. With fewer players, those still willing to write our industry have the ability to underwrite closer with terms and conditions that benefit their bottom line. In the past few years we have lost over eight property and casualty carriers to poor underwriting results (basically they were losing money). One prominent carrier was losing $1.75 on every $1.00 written. They either needed to stop writing in this niche or increase their rates. We are glad they just increased rates. The last thing we need right now is less carriers in the wood products industry. That's not fair, I have not had any losses. While this seems like a normal response, for the carriers that write our niche these losses must be spread across the entire niche which increases the rates for everyone. This doesn't mean you are paying the same as someone who has had a loss, as his rates are much higher. Will the pricing ever get back down to normal ranges? My estimation is that they will not (sorry). Now that assumes what you consider "normal." Normally competition drives down rates between