“It’s going to be a tough year for businesses,” says Elaine Hawkins, owner and president of Southwest Florida-based Private Client Insurance. “I’ve had to deliver that news to many of our clients.”
In 2020, Hawkins has seen property insurance rates on commercial accounts increase by 10% to 50%. Part of this has to do with reinsurance rates— the costs insurance companies pay to cover their own losses—which have gone up by 20% in Florida. “Those costs have trickled down to the consumer,” Hawkins says. Another reason has to do with what the industry calls “loss creep,” a term for those losses that increase over time. “Normally, in a property loss, it’s over and done with fairly quickly,” Hawkins explains. “A building is standing, and then it’s not, and then those claims get settled.”
The kink in the works is that clients have up to three years to file a hurricane claim, and the industry has seen a recent upsurge in people filing Hurricane Irma claims. The reason? “There are a lot of contractors who are knocking on doors and solicit- ing work,” Hawkins says. “They tell people, ‘I can get you a whole new roof because you have some broken tiles.’” These costs ultimately get spread around, and in the end everyone’s premiums go up.
A similar phenomenon is happening with automobile insurance. Commercial auto premiums will also go up this year. “I don’t know if there’s one commercial auto insurance carrier in Florida that has been profitable in the auto industry in the last five years,” says Ryan Schmidt, chief revenue officer and partner at Gulfshore Insurance, which has offices in Fort Myers, Naples, Sarasota and Fort Lauderdale. Commercial auto carriers in Florida have posted extremely high combined ratios, the measure of underwriting profit or loss. Many carriers have combined ratios for Florida auto in excess of 124%. “That means for every $1 in premiums a client pays, the carrier pays out $1.24 in claims, expenses, agency commissions and other underwriting costs,” Schmidt says. With more accidents on Florida roadways than ever and increasing litigation and settlements, auto insurance companies are passing those costs on to consumers.
Like Hawkins, Schmidt has also had to hand out bad news about rising rates to his commercial clients. “They’re facing a one-two punch from insurance premium increases, as well as reduced revenue from COVID,” he says. “Businesses are going to take a hit.”
