A global pandemic, supply chain challenges, climate change leading to CAT events and cyber risk have come together to increase claims and raise insurance prices across industries. Not only are these risks not evaporating any time soon, but they’re also likely to increase risk in 2022 for many businesses.
As a result, the insurance market is moving away from transactional coverage and more toward co-management of risk.
Understanding these trends — and, more importantly, the risk management solutions that position business owners in the face of underwriters — will be key to securing the optimal insurance coverage in 2022.
Here are four “mega-risks” we will see play out in 2022 — and how they are already affecting the P&C market:
1. Increased reliance on tech has led to massive improvements across industries. It’s also increased cyber risk for all.
Attempted online fraud in the hospitality sector is rising 156% year-over-year. In an industry in which 60% of businesses say they’re not ready for cybercrime, cannabis businesses are a major target for bad actors. And, cyberattacks against large food manufacturers halted production at several processing facilities last year. As cyberattacks become more common, cyber insurance rates will rise 20% to 30% this year.
What can you do? Brokers are partnering with vendors and insurance carriers to address this through risk management solutions, including improved network defenses, multi-factor authentication, employee training and third-party vendor security audits.
See also: Cognitive Biases and Risk Management
2. Natural catastrophes are raising the stakes. CAT modeling may be the answer.
In 2021, the U.S. had 19 weather disasters that costs $1 billion or more.
From wildfires to floods, tornadoes and hurricanes, farms and food manufacturers saw reduced yields from damaged crops. Real estate owners say it’s nearly impossible to find locations that aren’t exposed to flood, fire or storms. Hospitality is losing business as weather disrupts operations. As a result, P&C rates for both restaurants and lodging establishments will rise as much as 20% in 2022. Property rates for other types of commercial real estate will rise 10% or more, as well.
What can you do? Consider enhanced warning and predictive systems such as catastrophe (CAT) modeling and fire- and water-resistant construction materials when possible. While storms are more foreseeable, they are still out of human control; therefore, a strong risk management solution includes a thorough post-loss response plan for recovery and resuming operations.
3. Attracting and retaining quality employees is a key challenge in 2022. A strong stock market + an aging population is pushing intellectual capital into retirement.
Vaccine hesitancy is also squeezing labor markets, while leading to a rise of workers’ compensation claims in the healthcare sector. Although WC premiums are expected to remain flat in 2022, the challenge will be at the worker level, as remaining staff will have to work longer hours to make up for their fellow employees.
What can you do? Brokers can offer employers improved pay and expand extended benefits programs with perks such as paid apprenticeship training programs, vocational skills training programs and mental health services.
4. Supply chain disruptions are commonplace. Labor shortages and consumer habits have made it hard for businesses to deliver goods and materials.
In the construction industry, material shortages interrupted cash flow, leading to cost spikes, ruined schedules for projects and busted budgets. Expect construction coverage costs to rise between 5% and 35%, with large, risk-prone projects at the higher end.
For short-haul drivers, simply leaving port with cargo is an administrative and bureaucratic nightmare. Coverage for courier and delivery fleet will increase by 25% or more.
What can you do? Resilience is the key to mitigation, as businesses that can should build up materials reserves and develop new relationships with potential backup suppliers domestically. Think both local and regional suppliers.
See also: 20 Insurance Issues to Watch in 2022
Securing the right partner is critical to reducing risk in 2022
The COVID-19 pandemic has exploded risks and insurance coverage costs, creating a complex environment for business owners and employers of all types.
These conditions make it essential to partner with a broker that specializes in your market, understands your risk level and knows the market inside and out. In doing so, you can build a strong risk management and insurance program that positions your business for a successful year.
