The nutraceuticals industry has experienced rate decreases on insurance policies as businesses continue to prosper. It has quickly become the norm. There has been a trend and an assumption that if business revenue has gone up over the last 12 months, then the rates on the insurance policy would go down. It has become an expectation from the insured business over the past few years.

However, over the next couple of years, expect that a hard market for insurance is coming. Now is the time to begin budgeting.

Increasing Claims ... And Rates
Over the last few years, frivolous lawsuits and catastrophic property losses have been raging across the nation. From forest fires in California, hurricanes on the East Coast, wrongful terminations of employees, discrimination—these have all impacted the funds paid out by insurance companies.

Sprinkle COVID-19 into the mix, and we have seen an astronomical increase in claims for Management Liability and Cyber Insurance.

For many of you reading this, you may be able to look back to about 2004 and see that insurance costs for that year were probably 2-3 times the amount you are paying now. For example, a client of mine that manufactures sports nutrition products was paying approximately $450,000 for its Liability Insurance back in 2004. As of today, they pay just shy of $300,000 even though the business is almost double the size it was 14 years ago.

The rates on these liability policies have appeared to flatten out. Insurance companies are on the verge of trying to recoup some of the lost dollars from the excessive claim count over the last few years. Though you may have had zero claims in your business life, it’s important to realize that the same insurance company that provides (for example) your Product Liability insurance, may also be insuring businesses in the construction industry, aerospace industry, or tech. They may be on the hook for other businesses or industries that have suffered from large claims.

Bolton & Company has already seen this occur in the various industries we work with. Some businesses outside of the nutraceuticals industry have already begun to see 10% (plus) cost increases on various insurance policies. Of course, this increase will vary between different policies (i.e., Product Liability vs. Directors and Officers Liability).

Specifically geared toward the 300 businesses in the nutraceuticals industry that I work with, we have been fortunate enough to maintain flat rates, with the occasional rate decrease at each renewal. From an industry perspective, the large rate decreases on renewals are beginning to fade. A clean claims history along with a consistent record with a particular company can often help with cost on these policies.

Generally, the first thought of a business owner when they see a large increase on their insurance cost is that they must switch to a different company or get another quote. During a hard market, the flip flop between insurance companies may hinder an underwriter’s desire to provide quotes in the future, which can be detrimental.

Competition among the insurance companies is also beginning to burn out as insurance companies begin to reevaluate the types of businesses they insure, reduce the amount of limits they can provide, and restrict their appetites (types of businesses/products they will insure). Simply put, the competition begins to dwindle; and consistency is key when it comes to purchasing policies from insurance companies.

How To Prepare?
Now, more than ever, is the time to be thorough and transparent when going through your insurance policy renewals. Many times, underwriters will want to look at your business with a fresh set of eyes; and it can make the renewal process seem burdensome. And trust me, I understand the time it takes to go through these applications can be lengthy, but now more than ever, it is crucial. With thorough information, underwriters will be more willing to consider your business. Not only that, but it will provide underwriters with the appropriate information they need to consider providing any rate relief.

Having an insurance broker with ample experience in your industry can also be of great value. As insurance companies’ appetites and limits begin to restrict, the right broker will know which company will do “what” and what information they require. This will save time for everyone and allow for a smooth, efficient renewal process.

Whether you have gone through an insurance renewal over the last 12 months and experienced higher than normal increases, or you are getting ready to begin the renewal process, please take these thoughts with you while looking at your insurance policies.

Throughout the hard insurance market period, you should not feel hesitancy when wanting to ask a question to your broker. You are always entitled to a transparent and educational relationship with your broker, which should leave you with the peace of mind you need while growing your business.

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Chris Morey is associate vice president at Bolton & Company. He is a Certified Sports Nutritionist who focuses on the needs of clients within Bolton’s Dietary Supplement Practice Group. With more than seven years of customer service experience, Morey looks to find the right insurance solutions for his clients in the Health and Fitness industries. With a substantial focus on the supplement industry and all parts of the supply chain, he also strives to serve the hemp and CBD product space as the insurance industry continues to fluctuate and evolve. Prior to joining Bolton in 2015, Morey worked for Nutrishop USA. He holds a Bachelors of Arts in Business Administration from Azusa Pacific University. He can be contacted at cmorey@boltonco.com.