Why are My Commercial Property Insurance Costs Rising?
By Casey Myers
If you haven’t adjusted your commercial property insurance coverage recently, you may end up paying more after a loss. But why are costs rising? And what’s driving those increases?
Several factors are impacting rates, including construction material prices, supply chain disruptions, worker shortages and the weather.
Although the prices of construction materials have eased, they’re still historically high.
- Steel costs doubled from pre-pandemic levels.
- Concrete prices rose at the fastest rate in 34 years.
- Lumber costs about 42% more than it did before the pandemic.
Supply Chain Disruptions & Labor Shortages
Labor issues and supply chain disruptions have been contributing to inflation for the past few years. The ongoing long-distance van operator shortage is a significant part of the equation for the moving and storage industry. In addition:
- Supply chain bottlenecks forced more than 40% of businesses to increase prices.
- According to the S. Bureau of Labor Statistics, there are currently 10.1 million open jobs.
- Rising interest rates make it more expensive for businesses to borrow and invest money.
- Goods have been slower to market because of the ongoing semiconductor shortage.
- Shipping port congestion is leading to delays and price increases, particularly for companies utilizing West Coast seaports.
From severe storms to tornadoes, natural disaster statistics reveal that disasters are occurring more frequently and with greater intensity. Over the past five years, the U.S. has experienced an average of 18 billion-dollar climate disasters each year.
The U.S. has sustained 357 weather and climate disasters since 1980 where overall damages/costs reached or exceeded $1 billion (including CPI adjustment to 2023). The total cost of these 357 events exceeds $2.540 trillion. Businesses should expect an additional emphasis on weather readiness and risk mitigation efforts from insurance providers.
It's important to note that insurance rate changes can vary by region and individual circumstances. To understand the specific reasons for rate increases, it is always a good idea to consult your insurance broker. They can provide guidance based on a thorough understanding of your business needs.