Insurance premiums have grown dramatically over the last decade. Experts don’t see any change in this trend for the foreseeable future. Still, companies can decide on keeping these insurance costs at the level of an unavoidable nuisance and not letting them spiral out of control.
“300% over the last 10 years”.
We are quoting a CEO talking about the rise in insurance premiums his company has suffered since 2011.
One: during these 10 years this specific company wasn’t plowing through a bad luck streak. Nor did it show a significant rise in number of accidents and safety-related incidents.
And two: this price hike turns out to be far from an exception.
So, while the ‘cold opener’ of this article might score some shock value for some readers, a lot of execs will have experienced a similar – or at the very least unsettling – increase in insurance rates.
Clearly, in the long term and in all but very few circumstances, insurance premiums will go up. As will the general cost of doing business. However, a doubling or tripling over a decade represents an escalation that begs a closer look. Into its mechanics as well as into possible ways of mitigation.
An indirect cost is still (quite) a cost
There’s ample exploration and documentation about the actual cost of an accident or safety incident.
Summarized: this cost consists of
- direct or ‘seen’ costs, related to property and personal damages, worker compensation claims, executive and company liability …
- … as well as more often indirect or ‘unseen’ costs, like shutdown of production, logistics and/or construction, loss of working days and experience, loss of worker morale, recruiting options and company reputation.
Generally, (rising) insurance rates are categorized as indirect costs, but no company that, over the last decade, has experienced an increase of 200%, 300% or more, would consider them ‘unseen’.
Adding insult to injury: these ever more expensive insurance policies actually only cover a relatively small part of the total costs related to accidents. It is the company and not its insurance that ‘pays’ for lost time, sick pay, overtime working and temporary labor. Nor does it cover production delays, fines, loss of contracts, legal costs, loss of reputation, … .
Not everything that goes up …
Though insurance markets are by themselves cyclical, for a remarkably longer than average time the pricing pressure has been moving steadily upwards. Experts don’t expect any real change in the foreseeable future.
Also, and closely related to this persisting trend: insurance companies have maintained a stronger than usual discipline in upholding higher rates. Meanwhile very few newcomers are underbidding their well-established competitors.
So any critical alleviation from the insurance companies is far from expected. No real surprise there. And even should this market revert to its cyclic dynamic, in the longer run, those benefits will remain temporary.
A simple but far from easy solution
This leaves the obvious, the tried and tested solution: create, maintain and improve on workplace safety.
It’s the surefire way to prevent accidents AND to prevent insurance rates and premiums from skyrocketing – or skyrocketing even more.
Your overall insurance rate might still go up with each renewal, but every payout prevented is a premium rise averted.
Working towards zero incidents and accidents is a clear and simple ambition with benefits that clearly go beyond reducing rising insurance costs.
It is also far from easy and a continuous effort. And an efficient safety ecosystem comes with its own set of costs.
Still, even though soaring insurance costs may be just one of a multitude of reasons a company can not afford to ignore investing in workplace safety, it’s bound to become an ever more important one.