Three things move a commercial premium, and only one of them is about you. Here is how to work out which one moved yours, and which part you can do something about.
What moves the number.
A renewal increase is not due to one thing. It is the result of your own situation, the cost of rebuilding what you insure, and the state of the market you are insured in. Those three move independently, and they call for completely different responses. Before you shop the policy, it is worth knowing which one you are dealing with, because two of the three cannot be shopped away.
1. Your own situation
This is the part that is genuinely about your business, and the only part a broker can present differently. Claims in the last three to five years are the largest single factor, and not only paid claims: a reported claim that closed at zero still sits on your record and still gets read by an underwriter.
The rest of your file is exposure. Premium is calculated on measurable things, so if your revenue, payroll, vehicle count, building limit or contents value went up during the year, the premium follows suit. Business owners are often surprised by this one because nothing bad happened. Growth is not a penalty, it is simply more risk to insure.
Worth checking before you accept an increase: whether the values on the renewal are the ones you actually reported, or last year's figures carried forward with an inflation factor applied on top.
2. What it costs to rebuild
Property limits must keep pace with construction costs, and construction costs have increased significantly. The sum insured on a building is not what you paid for it, what it is assessed at, or what it would sell for. It is what it would cost to rebuild it today, to the building code in force today, with today's labour and materials.
When that figure rises, your limit must rise with it, and premium is charged on the limit. This is the increase that looks like an increase but is the policy increasing to the value it is insuring. Refusing it does not save money; it moves the shortfall onto your next claim, where a coinsurance clause turns underinsurance into a proportional reduction on the settlement.
- The building limit rose but nothing else changed: this is almost always valuation.
- A percentage deductible for hail, water or earthquake appeared or grew: that is the market, not you.
- Only your liability premium moved: look at revenue, payroll or a change in the work you take on.
3. The market you are insured in
Insurers price a class of business, not just a policyholder. When a class pays out heavily, insurers pull back from all of it, and a clean file gets a rate increase anyway. Alberta feels this more than most of the country because it sits in one of Canada's most active hail corridors, and severe convective storms have produced some of the largest insured loss years on record here.
The visible symptoms are rate increases across a whole industry, higher deductibles, or deductibles set as a percentage, on the specific causes of loss that are hurting, and lower limits on those same ones, and in the hardest markets, insurers withdrawing from a class entirely. None of that responds to a well-presented submission, because it is not about your submission.
What it does respond to is going to more markets. When one insurer is retreating from a class, another is often growing into it, and that difference is the entire reason to remarket in a hard year.
What to ask for before you accept it
- The values used to rate the renewal, so you can confirm they match what your business looks like now.
- Whether the building limit moved because of a valuation, an index factor, or an actual reassessment.
- What changed in the wording. Deductibles, sublimits and exclusions move at renewal too, and a lower increase sometimes hides a narrower policy.
- Which insurers were approached, and which declined. If the answer is "we renewed with the incumbent", the policy was never tested.
When shopping it is worth the effort, and when it is not
Remarketing helps when the increase is rate driven and other insurers are writing your class, when your file has improved since it was last placed, when your business has changed enough that the original placement no longer fits, or when the policy has simply never been tested against the market. In those cases a different insurer can produce a genuinely different number for the same risk.
It helps less when the increase is valuation, because every insurer will want the building insured properly, or when you have a fresh claim, because your record travels with you. It also helps less when you go looking three weeks before expiry, because a proper submission takes time to build and underwriters price rushed files conservatively.
Shopping is not free. It costs your time, it puts your account in front of underwriters, and doing it every single year with no change in circumstances can work against you.
Want a second opinion on the increase?
Send us the renewal and the current policy. We will tell you if there are better options for those areas specific to your business or if there are insurers with better appetites for your coverage. No obligation, and we will say so plainly if the answer is to stay where you are.