Issue link: http://palletcentral.uberflip.com/i/1498036
28 PalletCentral • March-April 2023 palletcentral.com Insurance Update By Mike Edwards T he insurance marketplace as whole has been in a hard market (increasing rates) for the last decade. When you break it down further into the wood niche and then even further into pallets, it is an even more dire situation. Unfortunately, an ever-deteriorating reinsurance market coupled with poor investment results over the past year only compound an already tough marketplace. While we hope for improvement soon, it is more likely we are in for several more years of rising rates and a shrinking pool of carriers interested in writing pallet operations. at being said, there are always things you can do to make your business stand out from the rest. Current Trends e property insurance marketplace is currently under distress, with the primary culprit being the number of catastrophic (CAT) weather claims over the last two years. In 2022 alone there were 18 weather or climate-related events that caused in excess of $1 billion in damages per incident in the United States. is has caused reinsurance (the insurance your provider purchases to spread their own risk) to as much as triple in some cases, resulting in a trickle down to the end purchaser (businesses and individuals). Depending on the region, the average increase on a property policy is over 30% due to reinsurance increases. e CAT losses have aff ected rates as well as availability of providers, specifi cally in tier one wind counties and zones with high hail or wildfi re scores. e commercial auto line of business is also on a downward trend. Increased replacement cost for heavy and extra heavy vehicles coupled with the current trial lawyer craze and prevalence of "nuclear verdicts" has led a national auto market that has been operating at well over a 100% loss ratio for many COVERED years. ose rates will continue to trend upwards until carriers are at least breaking even. General liability continues to be a safe risk for insurers in the wood product space. e product liability on pallets is very minimal. However, the trend we see leans more towards premises liability claims involving third parties being in manufacturing areas where they should not be present. e lone bright spot in the market is workers' compensation. Workers' comp has proven to be the most profi table risk for insurance carriers in the majority of states, resulting in more carriers entering the marketplace and aggressive pricing depending on loss history. Additionally, some carriers (both regional and national) have added incentive plans, most notably profi t sharing for companies that have low claim frequency and sustained loyalty to a carrier. Insurance: Old vs. New Advancements in technology have added new elements for the forest products industry and their risk management plans. e most signifi cant would be the amount of automation in the manufacturing process. What used to be dominated by hands- on labor has now dramatically shifted towards streamlined systems, in turn leading to increased values for proper business personal property (BPP/ equipment) coverage. Additionally, the need for equipment breakdown coverage has never been higher. Equipment breakdown is meant as a round out to traditional commercial property coverage for perils excluded on a traditional commercial property coverage (steam boiler/centrifugal explosion, power surge, mechanical breakdown due to electrical arching, etc.). While it used to be a "throw in" coverage that was rarely used, we are seeing carriers take a closer look at this coverage by breaking it out and underwriting it separately. From property to general liability to commercial auto, the insurance marketplace is continually evolving within the pallet industry. IT PAYS TO BE iStock/z_wei