Mastering Commercial Insurance Renewals: A Top Consultant’s Guide to Strategic Planning
Skyrocketing insurance premiums. Diminished insurance capacity due to the rise of billion-dollar catastrophes. It’s never been harder to secure adequate, cost-effective commercial insurance.
With commercial insurance renewals on the horizon, it’s time to rethink how you approach your insurance-related strategies. Those who don’t could financially lose out—this coming year but especially in the long run.
To keep your commercial real estate portfolio profitable, here’s how expert commercial insurance consultant Mitch Davis recommends navigating this season of commercial insurance renewals.
Meet the Commercial Insurance Expert: Mitch Davis of MB Davis Group
Mitch Davis is the lead commercial insurance and risk management consultant at MB Davis Group. He’s served for almost three decades as a senior professional in commercial insurance.
He specializes in several industries:
- Real estate
- Financial services
- Retail industries
- Oil and gas
He brings negotiation skills, enterprise risk management abilities, a focus on business preservation, and innovative problem-solving solutions.
By following his commercial insurance recommendations and carefully coordinated insurance programs, Davis has protected his clients from billions of dollars in industry-specific risks.
8 Expert Tips for Commercial Insurance Renewals
As you begin planning for your upcoming commercial insurance renewals, keep these eight insights in mind.
- Commercial Insurance Is Not Business as Usual
- If you assume you’re going to get the same commercial insurance coverage, premiums, rates, and terms you’ve always received, you will be in for a rude awakening this renewal season.
- The commercial insurance landscape has changed, and it continues to change. In this new reality, long-term financial success with your commercial real estate portfolio requires you to stop thinking transactionally about your commercial insurance and start thinking strategically.
- It’s never been more difficult to secure adequate, gap-free, cost-effective commercial insurance. This is especially true for companies and entities with large commercial real estate holdings.
- For them, creating insurance packages often requires creative, innovative solutions and a deep understanding and knowledge of all commercial insurance rules, regulations, and possibilities.
- Bringing in the perspective and expertise of a commercial insurance consultant can help you successfully navigate this renewal season. A consultant can also create a longer-term plan that proactively protects your portfolio as the insurance market continues to shift.
- Diminished Capacity Presents Coverage challenges
- As natural disasters become more frequent and costly, fewer investors are choosing to dedicate their investment funds to commercial insurance companies. This has created diminished capacity throughout the industry.
- With that lack of funding, it’s no longer a given you can secure sufficient commercial insurance in a way that financially makes sense.
- As those natural disasters only look to increase in frequency, devastation, and cost over the years, you must proactively ensure your portfolio is desirable to insurance companies.
- In a landscape where those insurers can pick and choose what buildings to cover, your long-term strategy must focus on ensuring your buildings are the ones that get coverage.
- In part, this means setting aside the capital to make your buildings maximally resilient again natural disasters (fires, tornados, floods, hurricanes). Building owners who don’t invest in those improvements could eventually find themselves uninsurable.
- Plan for Increasingly Unfavorable Insurance Terms
- The reality of commercial insurance today is that premiums are more expensive and terms and rates are less favorable. It’s unfortunate for commercial real estate owners, but those are the facts.
- During this renewal season, the best course of action is to plan for this new reality. The unfavorable terms aren’t going anywhere. All you can do is make a strategic, realistic plan that accounts for today’s commercial insurance landscape.
- You never want to be financially surprised by anything. That’s when you scramble, panic, and stress. This renewal season, account for the logistical and financial reality of commercial insurance. This will help you avoid those unpleasant, last-minute financial surprises.
- Plan for Buildings to Increase in Value
- Increased building valuations is one factor that continues to drive up premiums and rates. As buildings are worth more, there’s an associated increase in commercial insurance costs.
- Building valuation data indicates the cost per square foot of a business-designated building in August of 2020 was $202.30. Just two years later, it was $265.63. That’s an increase of a little more than 31 percent.
- Insurance companies are now often compelling real estate owners to purchase more insurance coverage as a condition of coverage.
- Just as you should plan and account for diminished capacity in your renewal strategy, plan for this boost in building valuations and the associated rise in premiums and rates.
- Plan for Increased Construction and Repair Costs
- If any building within your commercial real estate portfolio does sustain damage, account for the rapid increase in construction and repair costs. Be especially aware that damage related to a mass natural disaster will be even more costly than damage to your building alone.
- Account for this in both your renewal strategy and budgeting.
- If you’re in an area likely to be affected by natural disaster, this is especially critical.
- Improve the Resiliency of Your Buildings
- With diminished capacity, insurance companies must become more selective about which buildings they offer coverage to. In that landscape, it’s important to make short-term and long-term plans around improving the resiliency of your buildings. This does mean increasing your capital expenditure budget to accommodate.
- Does this mean you’ll spend more money—now and over the years? Yes.
- However, making your buildings more resistant to general damage and the impact of natural disasters could save you many times over in repair costs, insurance premiums, and insurance rates.
- As the commercial insurance market continues to get even tighter over the years, it could even be the deciding factor as to whether your buildings are insurable.
- When it comes to your commercial real estate portfolio and your insurance plans, consider the significant cost of doing nothing or doing things the way you’ve always done them in the past.
- Don’t Leave Commercial Insurance Renewal to the Last Minute
- Give yourself adequate time to review, consider, and choose the best commercial insurance plan for your portfolio moving forward. The more complex and riskier your portfolio, the more time you should give yourself.
- From what you pay in premiums to the cost of insurance coverage gaps, the potential financial ramifications of your insurance plans are massive. Don’t put yourself in a position where you’re up against the clock and must make a rushed or reactionary decision.
- Don’t Navigate Commercial Insurance Renewals Alone
- The commercial insurance landscape has always been highly complex. Given global circumstances today, it’s harder than ever to navigate:
- Rising inflation
- Escalating effects of climate change
- Increasing building valuations
- More expensive construction costs
- Using their wide industry knowledge and strategic, forward-thinking, big-picture view, commercial insurance consultants can help you secure the best possible rates, terms, and premiums.
- They can also create dynamic, strategic plans that position you and your portfolio to secure those favorable terms year after year—despite the landscape becoming increasingly challenging.
- Also, because they’re consultants rather than insurance brokers, they aren’t earning commission on the policies sold. You can be fully confident you’re getting objective advice about the specific insurance plans they recommend.
Are You Prepared for Your Commercial Insurance Renewals?
Are you relying on brokers alone to handle your commercial insurance plans? Are you trying to navigate the nuanced, changing insurance landscape with just your in-house team?
As the market shifts, if you’re not making deliberate, forward-thinking plans, you could eventually find your portfolio uninsurable. If you haven’t already, now is the time to pivot your short-term and long-term strategies around commercial insurance.
At MB David Group, we have decades of experience in commercial insurance consulting. Beyond that, though, we prioritize long-term business preservation. We know this industry, and a large part of what we do is anticipate and account for industry trends that will affect our clients.
To discuss your options, today and down the line, schedule a consultation.