Mid-sized businesses are recovering well, but trouble is looming

In addition to showing revenue growth, more than half (58%) of mid-market companies are increasing their workforce – even in a tough market – to meet unprecedented consumer demand. Job growth among middle market companies last year was 10.8%, which Ben Rockwell, president of the Chubb Middle Market division, attributed to new businesses, sales and services.

“Twenty-three percent of mid-market companies added a new plant or location in the past 12 months, and 51% plan to add a new plant or location in the next 12 months,” he said. “We found that half of mid-market companies have launched a new product or service in the past year, and 61% plan to do so in the next 12 months. And we also found that 36% of mid-market companies have expanded into new home markets, and 57% say they are very likely to expand in the next 12 months. This also affects their recruitment process.”

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While this is good, there are other factors that are happening around economic growth, transportation disruptions, competitive risk, and the risk of disaster that many middle-market companies are finding difficult or very difficult, according to a report by Chubb and NCMM. Inflation was the number one problem cited by middle-market companies in the survey, with 62% of companies saying it was a very or very difficult problem for them.

“Inflation has a big impact on a lot of things that we see in the middle market,” Rockwell told Insurance Business. “Businesses need to consider and plan for increased inventory, inventory, cost of ownership, increased turnaround time – all of which have increased due to inflation – as well as procurement issues, and labor shortages. 60% of respondents said that inflation has affected their ability to return their property to their previous location. “

Of the 39% of companies that indicate that inflation has affected their company, 62% said they will raise their prices or prices in response. In addition, mid-market companies are well aware of how the cost of risk has increased, with three out of four companies (75%) realizing that the replacement cost of covered assets has increased – highlighting the importance of accurate calculations and strong business continuity plans.

Rockwell said a strong partnership between mid-market companies and their insurance agents and brokers is “more important than ever” when faced with financial crises, especially when it comes to implementing risk mitigation strategies and identifying and filling any potential gaps to reduce exposure.

“It is very important for our middle market clients to work with their agents and brokers to assess their performance and how inflation will affect that,” he said. “They need to talk about the cost of total risk and the pressure that inflation is putting on their prices. Most of the mid-market companies we surveyed have already reviewed their sales situation due to rising costs of premiums, and 72% say they will consider raising premiums.”

“The important thing is that the middle market companies are discussing this with their broker for all their risks, their exposure, and their services. They need to talk about the effects of coverage, the decisions they can make around the limits they buy, and the discounts they consider. All of these differences can help insurers deal with these difficulties in light of the low inflation rate.”

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In addition to rising inflation, 55% of middle-market companies said they were directly affected by supply disruptions, up from 47% in the fourth quarter of 2021. 85% reported negative earnings estimates for the remainder of 2022.

Again, Rockwell stressed that “brokers and agents play a major role” in helping insurers mitigate these risks — and a report by Chubb and NCMM shows that “the relationship is there,” with 90% of middle-market companies reporting that they talk to their insurers. advisors on these topics.

“The actions are there, and businesses are working with insurance carriers through the way programs are created, how services are provided to support what the agent or lender can offer – everything from business negotiations, to help with the value of houses, and so on,” Rockwell explained. “All of this has helped insurers understand and deal with some of the challenges we face today.

“At Chubb, we spend a lot of time with our agents and brokers, mainly through the technical services we provide, but also through requests to help them develop programs together. We often increase what our agents and brokers can offer, to help them develop programs that meet the needs and their customers’ problems.”

Looking ahead, Rockwell doesn’t see rising inflation and supply chain delays settling down any time soon. He emphasized the importance of good business planning, and a strong partnership between insurers, agents/brokers, and insurers to deal with any emerging challenges.

He encouraged mid-market companies to use the 2022 Mid-Year Market Indicator as an analytical tool to assess their peers’ concerns and how they are responding to these challenges. He added: “It also drives good conversations about how we can help these companies predict and prevent losses, and it helps us develop stronger insurance programs.

“It’s very helpful for us to understand the challenges within the middle market. Chubb is committed to the middle market, so the deep understanding we have of what our insurers are facing and what they’re affected by will allow us to work with our agents and brokers to address them. There are benefits.” to everyone.”