With so many uncontrollable variables affecting the insurance industry today, retail agents face significant challenges when representing clients with a history of large or frequent losses, as carriers typically view high-risk clients as liabilities. The result? Higher premiums or denial of coverage. For agents, leveraging innovative approaches and the extensive network of wholesalers can make a big difference.
Why the Rise in Claim Costs?
It’s important to understand the factors driving up the average cost of a claim. Economic factors like inflation play a significant role. The overall inflation rate has pushed up the cost of repairs and replacements, making insurance claims more expensive. For example, the cost of building materials has risen by over 30% in the past three years, directly impacting property claim costs. Higher wages and labor shortages have also increased the cost of hiring skilled workers for repairs, further driving up claim expenses.
Material costs have also seen significant hikes. The price of construction materials like lumber, steel, and concrete has escalated, leading to higher property claim expenses. Lumber prices, for instance, have fluctuated drastically, sometimes more than doubling their typical rates. Furthermore, the need for advanced repair technology, such as smart home systems, has increased the average claim cost.
Tomorrow’s Forecast: More Claims, More Cost Hikes
Weather patterns and climate change have also exacerbated the situation, contributing significantly to the rise in claim costs. Here are some detailed factors:
Increased Frequency of Severe Weather Events: The frequency and intensity of natural disasters, such as hurricanes, wildfires, and floods, have risen. The 2023 season alone caused $250 billion in overall losses globally.
Extended Recovery Periods: Severe weather events cause extensive damage, leading to longer recovery times and higher costs due to the need for temporary accommodations and emergency measures.
Changing Weather Patterns: Climate change leads to more unpredictable weather patterns, making it harder to prepare for and mitigate potential damages. For example, regions that previously experienced mild weather now face severe storms and floods, leading to unanticipated claims.
Position Your Clients Favorably
To address higher premiums or coverage denials, you’ll need to reposition these clients in a way that highlights their proactive risk management and any loss prevention measures they’ve taken following a claim. Detailed claims history, accurate data, and context surrounding the claim demonstrates proactivity and transparency. In addition, the following steps can also be taken with your clients:
- Conduct Comprehensive Risk Assessments: Evaluate specific vulnerabilities in clients’ operations or properties to develop detailed risk profiles.
- Implement and Showcase Risk Management Practices: Encourage clients to adopt advanced risk management strategies and perform regular maintenance and audits.
- Leverage Data and Technology: Use data analytics to identify patterns in claims history and implement real-time monitoring systems for immediate risk detection.
- Educate Clients on Loss Prevention: Offer training programs and awareness campaigns on proactive risk management and emergency response techniques.
- Enhance Coverage Customization: Work with a wholesaler like Jencap to create tailored insurance solutions that address the specific risks identified in the client’s profile.
Finding Solutions with the Right Partner
In an environment where the average cost of insurance claims continues to rise, you can do everything right and your client can still experience a large shock loss or a stream of claims that makes insuring their risk challenging. Rest assured, when this happens, Jencap is here to help. We specialize in hard-to-place risks and provide innovative solutions to manage offensive claims histories. By leveraging Jencap’s extensive network of carriers and specialized expertise, you can secure better coverage and terms for your high-risk clients, ensuring they are adequately protected against future losses. Contact Jencap or get a quote today.
Kathryn Smith
Jencap's Managing Director of Marketing, Kathryn Smith, has dedicated her entire career to the insurance industry. A diverse background equips Kathryn with a unique 360-degree perspective, having experienced the industry from all angles: agency, carrier, and wholesaler. She consistently produces award-winning marketing content and hosts the Jencap insurance podcast, "Flip the Cap."
