Unfortunately, inflation is struggling with inflationary pressures. As they evaluate how to use their money, their money, and their returns, which has been troubling the insurance market in the past few years, they may face other problems – including an increase in costs.
The cost of claims during this period is directly affected by the costs of purchasing damaged goods, the increase in business interruption time, the cost of medical care, and all costs related to litigation.
So, with the food and beverage industry already facing rising costs in many areas, how can they work to manage insurance costs related to these rising costs?
Improve Your Foundation for Greater Improvement
Many food and beverage manufacturers are forced to pass on additional costs to consumers, which increases their costs. However, this does not give a true picture of exposure as the insurance companies write. The problem is that insurers usually associate an increase in income with an increase in risk. But in some cases, the amount of things being produced increases only slowly, compared to the amount of income they earn.
One solution to this problem, and a way to create stability, predictability, and consistency in pricing, is to discuss changing ratings on your regular schedule. Financially rated companies may consider the possibility of changing to a measure that better reflects their production, such as weight or units produced.
Take a berry processor, for example. In the face of inflationary pressures, the company can see its revenue increase by 20% year-on-year while improving the productivity of its customers. However, the increased revenue may come from processing the same fruit as last year. The actual volume of sales in the market has not changed. By shifting the basis of calculation from cash to pounds produced, the company is able to obtain a more accurate rate and premium for its exposure – and avoid further complications from inflation.
Talk Quickly with Your Carrier When Reviewing Cargo Conditions
The cost of building materials, such as wood and drywall, has increased. Labor problems and job losses are delaying the recovery of companies that have suffered from asset losses. These factors are driving insurance companies to closely monitor property prices, and in many cases, forcing insurers to increase their insurance rates.
If insurers are unwilling to comply, or fail to report, they may face penalties in the form of coinsurance at the time of the loss. This can cost them a lot of money – at a time when they are trying to reduce their expenses.
We recommend that you start following this topic in advance of your next revision. Think about your current habits—have they changed over the past few years? Have you considered supply chain disruptions in disrupting your business? Do you have a backup plan to get equipment and machinery if your regular salesperson can’t meet your schedule? Many food and beverage industries require specialized machines, often imported from overseas, that last a long time. Having backups in place can significantly reduce your downtime and business interruption.
After the correct values are determined, make sure that your broker negotiates with the insurance provider to control your rates. With more content, more exposure will increase your value. However, your broker should negotiate to keep your rates flat, or low, even if your rates are going up.
Try Strategic Risk Management
This is true at any time, but when insurance companies are struggling with increased costs due to inflation, companies that use risk management strategies and work hard to prevent losses will be seen better by underwriters. This means that they will receive better returns than those that do not manage and have a losing track record.
This is not the only advantage. As mentioned earlier, during periods of high inflation, claims are very expensive. If companies are looking for ways to reduce insurance-related costs, avoiding claims is a good way to do so.
For example, consider areas such as your car and fleet safety policies. Provide annual driver’s education and training, implement a driver’s license program to ensure your drivers have a good record, and have a wireless communication plan to prevent distracted driving, which leads to car accidents.
Review Your Discounts/Savings—Are You Ready to Take More Risks?
While insurance companies are evaluating the appropriateness of insurance reserves and deductibles to deal with inflation from targets, insurers may choose to increase their retention/deductibles. This can sometimes be a good way to have premiums if the company wants to retain more risk.
For example, let’s say you’re carrying $50,000 in cash on your property policy. You might consider looking at a $100,000 or $250,000 deduction to reduce your salary.
In general, the five-year return on the delta is a good rule of thumb for determining whether the change is reasonable (ie, if going from $50,000 to $100,000 withdrawal saves $20,000 in annual salary, then in five years without loss. , you would save $100,000).
This may not work in all cases, but it is always worth checking as a way to control premium increases.
Specialists Can Help You Manage Costs
In these difficult times of rising rates, it’s important to take the time to think about your insurance costs and how they affect your business. Working with the right broker who understands the challenges facing the food and beverage industry, and who can provide effective and creative solutions, can help you stay insured.