Why Your Renewal Quote Is Higher (Even If You Didn’t Have a Claim)

It is one of the most frustrating phone calls a church administrator or business owner can receive: your insurance renewal is up, and despite a year with zero accidents, zero injuries, and zero property damage, your premium has increased by 15% or 20%. It feels unfair- and it might be! Unfortunately, insurance pricing is influenced by forces far beyond your specific organization, and even ours. In the current “Hard Market,” several external factors are converging to drive rates up for everyone.

Here is a look at some of the “hidden” reasons why.

1. Property Revaluation and “Replacement Cost”

The single biggest driver of premium increases right now is the skyrocketing cost of construction. Insurance isn’t based on what you could sell your building for today; it is based on what it would cost to rebuild it from scratch. Inflation has significantly increased the price of lumber, steel, and specialized labor, so to ensure you aren’t underinsured, carriers are increasing the “Total Insured Value” of your buildings. Even if the rate stayed the same, a 10% increase in the building’s value results in a 10% increase in the premium.

2. “Social Inflation” and Rising Jury Awards

“Social inflation” refers to the trend of rising insurance losses due to increased litigation and much larger jury awards than in the past. They call some of these “nuclear verdicts”, or settlements that exceed $10 million. To protect their ability to pay these massive claims, insurance companies must increase the “pot” of money they hold.

3. The Reinsurance “Squeeze”

Insurance companies have insurance too, called ‘reinsurance.’ This is how a local carrier survives a catastrophic event like a hurricane or a massive wildfire. However, global reinsurance companies have faced years of massive losses due to natural disasters. As a result, the reinsurance carriers have raised their prices significantly, and your insurance carrier is probably paying much more to protect itself. Those costs are passed down to policyholders in the form of higher base rates.

5. Technology and Complexity in Vehicles

If your organization has a fleet of vans or buses, you’ve likely seen an increase in Auto coverage. This is because more and more modern vehicles are packed with sensors, cameras, and specialized glass. A simple fender-bender that used to cost $500 to fix now costs $3,000 because of the technology behind the bumper.

What Can You Do?

While you can’t stop these global trends, you can mitigate their impact by becoming a “Best-in-Class” risk. Documenting your safety measures, maintaining your roof, and conducting regular driver training are the best ways to show an underwriter that your organization is a safe bet, even in a difficult market.