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Business Insurance Trends and Predictions for 2021 and the Impact on Your Business

By January 18, 2021March 4th, 2022No Comments
Business Insurance Trends and Predictions for 2021 and the Impact on Your Business

For small businesses across America, 2020 has been one of the most challenging years in history. Despite the coronavirus pandemic, small business owners have been resilient, pivoting and adapting their business models to navigate continually changing conditions. With the new year on the horizon, there are potential new opportunities to take advantage of and ways to adapt to challenges you may face. Here are a few business trends that are likely to dominate in 2021, along with tips on how to position your business for growth.

1. Hard market conditions are ahead.

Due to the hit that the economy has taken in 2020 as a result of the COVID-19 pandemic, business owners must prepare for hard market conditions in 2021: this will include higher premiums. Insurance companies will likely be erring on the side of caution, introducing new coverage limits and adding new terms and conditions to policies to ensure they aren’t hit too hard by any potential further waves of Covid-19.

Although higher premiums may be in the forecast, insurance companies will no doubt double down on their efforts to add value and ensure that customers don’t look for other options when premiums rise.

2. Data-driven insurance may deliver lower premiums for some.

Over time, Big Data and sophisticated models will allow insurance companies to lead with risk-based pricing at an increasingly granular level. Emergence of new risks will create new underwriting and portfolio risk management techniques as well. Data-enabled processes will minimize friction and streamline the customer insurance journey, from request for coverage to claim.

In the long run, this pricing strategy will save insurance companies money and ensure that pricing is fair. As a result, low-risk customers will enjoy lower premiums, and only truly high-risk customers will be required to pay steeper rates.

3. Value propositions will become a big part of the insurance landscape.

Since higher insurance premiums are in the forecast, insurance companies will need to come up with creative ways to retain existing clients and earn the business of new clients. To stay competitive,  insurance companies will likely bring new value propositions to market to gain that competitive edge. This is likely to take the form of more flexible insurance offerings, including usage-based solutions.

4. More businesses will lean on captive insurance.

In 2021, business owners will continue to face pressure to reduce insurance premiums or at least battle against the rising prices. As a result, many business owners will be considering alternative insurance options such as captives.

Captives and similar alternatives have been an effective and financially beneficial way for small businesses to mitigate risk for decades, and that’s no different in the age of COVID. Captives will take a leading role in 2021 renewals and give business owners a stronger hand when it comes to negotiations with insurers. They will be at the core of companies’ risk transfer and risk management strategies.

5. Employment practices liability insurance (EPLI) will be a critical part of your risk management strategy.

2020 saw a large increase of employment practices liability insurance claims. EPLI claims related to COVID-19 targeted a wide range of employment practices, from claims alleging employers failed to take proper steps to reduce health and safety risks for their workforce to claims alleging employers discriminated against employees with COVID-19 concerns.

Businesses with workforces returning to the workplace should evaluate their employment practices liability insurance (“EPLI”) policies to assess coverage and how they might respond to COVID-19-related EPLI claims. Businesses should also anticipate premiums to increase by 10% due to anticipated high claim frequency and severity due to the COVID-19 pandemic, social movements (Black Lives Matter and #MeToo), LGBTQ+ protections, marijuana legalization, and Wage and Hour violations.

6. Businesses will face increased cybersecurity risks.

Maybe your workforce is fully remote now, or maybe your business is simply at increased risk due to the overall increase in cybercrime under COVID-19. Either way, cybersecurity is a legitimate concern for many business owners out there navigating a world that is suddenly much more virtual than it was several months ago.

If a costly data breach occurs, your company might not have enough resources to resolve these issues and cover the losses. That’s why cyber insurance will be such a critical piece of your risk management strategy for 2021. Cyber insurance can provide support to your businesses so cyberattacks don’t cripple what you’ve worked so hard to build.

7. COVID-19 related organizational adjustments will lead to workers’ compensation –related reporting changes.

Effects of COVID-19 have forced employers to make organizational adjustments, which could be subject to various workers’ compensation –related reporting changes. These changes may impact premium costs and experience modifiers.

Other trends include the adoption of Telemedicine for medical services needed due to an work related injury, rising frequency and Severity of Mega claims (over $3MM) and a rise in Comorbidities among the employed workers.

How your business will respond not just to the pandemic’s impact but to longer-term shifts in insurance, technology, and the economy will be critical. Innovating in the area of risk management could turn out to be the biggest differentiator for your business in 2021 and beyond.

Arbor Insurance Group provides business insurance and other personal and business insurance products throughout the Lehigh Valley, including Allentown, Bethlehem, Easton, Emmaus, Macungie and surrounding areas.

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