Like most businesses, insurance companies have tried hard to keep costs in line with current rates. However, over the last year, the insurance industry has seen a rise in costs and this has costs losses to its expected profits. As a result, the industry is not generating the returns they would like so most insurance companies are seeking rate increases of 5% to 10% or more for some lines. However, the insurance market has a significant amount of surplus or available capital, which drives competition. While companies would like to raise prices, this competition serves as a moderating factor.

So, what can insurance buyers expect in 2023? Assuming similar exposures (payroll, property values and revenues) and a decent loss history, buyers should conservatively budget for a rate increase – the value largely dependent on the type of business one operates. The following is what you can expect for certain lines:

Certain properties are seeing significant increases, however. Anything remotely exposed to wildfire and flooding risk will see massive rate hikes. This affects both personal and commercial lines. Properties with wind-driven exposures are also difficult to insure. Expect flood premiums to go up significantly. Note that the replacement value of most properties has increased significantly due to inflation, so do not be surprised if your insurer insists on higher replacement cost values.

This line of insurance is experiencing modest increases. However, like all lines, this can vary. Some commercial construction and life science risks may see decreases, while certain habitational and hospitality businesses have seen double digit increases.

This line of insurance includes directors and officers (D&O) liability, employment practices and crime coverages. In the US, the market remains competitive with 5% to 10% average rate increases expected. The exception is public D&O, which is seeing flat renewals and, in some cases, rate decreases of 10% or more.

For years, this coverage was underpriced, but now rates are going up and underwriting requirements are strict. Cyber insurance is volatile and the number of new players entering the market make it difficult to provide a general idea of what insurance buyers might expect on renewal. Based on recent experience, cyber insurance costs will likely go up substantially now that is a much sought after line of coverage for most business owners.

This line of insurance is for your typical accountant, lawyer, architect or engineer remains in fairly good shape. There are a number of insurers competing for business and experience has been decent, but not great. Many insurers are seeking increases of 10% or more, but as mentioned above, competition is helping to soften this and most accounts are renewing with minimal rate increases.

Every business has different exposures, business practices and loss histories, all of which will affect your insurance costs. Firms that invest in loss prevention, proactive HR practices and aggressive claims management are generally looked upon more favorably by the underwriting community. The importance of risk management in controlling insurance costs cannot and should not be overlooked. In the end, while some conclusions can be made based on a macro view of the insurance industry, the best way to budget appropriately for 2023 is to have a discussion with your insurance broker.