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Why are your business insurance premiums rising?
Having the right insurance cover is crucial for small businesses because it helps to protect your firm when things go wrong. But premiums – already costly – are rising quickly. Here, we explain why prices are increasing and the steps business owners can take to keep premiums under control.
Why do business insurance premiums rise?
According to research from the Federation of Small Businesses, 60% of companies saw their insurance premiums rise in 2021-22. Over half said prices had increased by 11% or more, and one in six said that insurers had restricted their cover at renewal.
There are plenty of reasons why insurance costs are going up. Some involve the wider economic environment, while others relate to your specific policy. Understanding the key triggers can help you work out where you can make savings.
Inflation and geopolitical events
One of the main factors pushing up premiums across the board is inflation. Soaring inflation means that the cost of goods and services is higher. This has a knock-on effect for insurers. Events such as COVID-19, the war in Ukraine, and Brexit have all created supply chain issues that contribute directly to rising costs.
Beyond impacts on the world economy, global events can also directly impact insurance costs. For instance, the rising number of cyberattacks is pushing cyber insurance prices higher, while adverse weather events make property insurance premiums more expensive.
There’s not much you can do about the wider economy, but you can make sure you’re getting the best price for your insurance. You can do this by making sure you shop around each year before you renew your policy and switching if someone offers you a better deal.
It’s also worth considering using a broker who can help you find the right product for your needs and check whether wrapping different insurances together will prove cheaper overall. For instance, you can get package policies that bundle together general liability and property insurance, which may be cheaper than buying each individually.
Some trade unions and professional bodies have relationships with insurers, which can get you a favourable rate. Browse our comparison deals to see how these stack up against offers available on the general market.
Claims history
When you claim on your insurance, it pushes your premiums higher the following year. However, if you go years without making a claim, costs rise more slowly or even stay the same.
Taking steps to reduce your risk and minimise the chances of claiming can help keep insurance costs low.
For instance, improving your health and safety practices can reduce the risk of needing to claim on your public liability insurance. Training staff carefully can reduce the number of accidents and injuries on site, while providing healthcare benefits can help people get preventative medical treatment, reducing long-term sickness.
Equally, investing in measures like flood protection will minimise the need to make property insurance claims while improving your business continuity.
Learn how to prevent business insurance claims
Promotional rates ending
Sometimes, insurers offer great introductory rates to attract new customers. When these promotional periods end, premiums can rocket. That’s why it’s really important to shop around each year rather than rolling onto the same contract. Doing a quick comparison can take minutes, but could save you serious money. Make sure you start doing your research several weeks before your renewal date, giving you time to find the best deal.
Additional cover or extras
Some insurance companies will upsell you additional cover or extras. These can be valuable, but they also push up prices. Think carefully about what you need – it’s important not to be under-insured, but over-insurance can also be a costly mistake. If you want the extra cover, check to see whether getting it separately from another provider would be cheaper.
Your business has grown
The bigger a business is, the more it costs to insure. This can be true whether you’ve boosted your revenue, hired more workers or expanded your premises. If your company has grown, it may be time to consult your broker or do some independent research to ensure you have the right coverage at the right price.
Should I update my business insurance details?
Updating your business details can mean premiums increase, particularly if you’ve hired new employees, relocated or diversified. However, you need to update your insurer on any changes. Failure to do so could mean that your policy is invalid. And lying to get lower premiums is fraud.
Instead, look at ways to reduce your risk to get lower-priced policies. Here are our top tips for getting cheaper business insurance:
Look to see if package policies are cheaper
Remove unnecessary extras
Use comparison sites
Work with a broker
Improve health, safety and business governance
Work with your insurers to find ways to de-risk
Stay on top of renewals
Make sure you’re not underinsured
As a business, you want to keep your insurance premiums as low as possible, but ensuring you’re not under-insured is crucial. Under-insuring means you won’t have enough protection if things go wrong, which would be more expensive in the long run.
For instance, if you’ve underestimated the value of your stock or your annual turnover, you won’t be able to claim enough in the event of a loss. Equally, opting for 12 months of business interruption cover rather than 24 could mean you have a period where you’re not covered if recovering from an incident takes longer than a year.
This is why it’s sensible to work with your insurers to make sure you have the right levels of cover, and that there aren’t any significant gaps. Brokers can help ensure you have all the right insurance in place.
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