The Commercial Insurance Squeeze is Real: How Smart Businesses Are Fighting Back
Commercial insurance premiums are rising, making it tougher for businesses to stay competitive.
As reported by Insurance Business, commercial insurance premiums have risen 4% to 7% per year in recent years. A CIAB survey, meanwhile, found commercial insurance premiums had increased for 25 straight quarters.
These higher premiums are affecting multiple areas of the commercial insurance space:
- Commercial property insurance: +3.6%
- Business interruption coverage: +3.6%
- Business owner’s policies (BOP): +3.0%
- General liability coverage: 2.3%
- Commercial auto coverage: +6.7%
- Umbrella / excess liability coverage: +6.7%
- Composite rate: +3%
The price hikes are impacting small businesses more than larger ones. According to the same report, small accounts (up to $25,000) experienced the largest increase, with premiums rising by 4.7%. Larger businesses, meanwhile, reported average premium increases of 2.3% to 3.7%.
Businesses in higher-risk industries or higher-risk areas, meanwhile, are facing rate hikes of 20% or more. Some businesses have greater exposure to liability claims, like product defect lawsuits. Others have significant property in areas prone to wildfires, floods, and other natural disasters.
Why Commercial Premiums Are Rising
It’s easy to blame higher premiums on inflation and natural disasters. That’s certainly part of the problem.
However, higher commercial insurance premiums are linked to a range of issues overall.
Some of the reasons you’re paying more for business insurance today than last year include:
Natural Disasters & Climate Risk: Between 2020 and 2022, US insurers paid $655 billion in catastrophe claims, marking the costliest three-year period on record in US history. Catastrophe bonds, meanwhile, reached a record $18.1 billion in 2025, highlighting insurers’ need to offset the risk of weather disasters.
Legal Costs & Social Inflation: Insurers are paying more in liability claims than ever. A factor called “social inflation” is hitting commercial insurance particularly hard. Namely, it’s become more acceptable to sue large companies and for juries to award large sums of money to plaintiffs. US casualty insurance premiums have increased for 23 straight quarters, and some are blaming skyrocketing jury awards and higher legal expenses. Casualty rates rose another 8% in early 2025, and some insurers are expecting to hike liability premiums 20 to 25%.
Rising Claims Severity & Frequency: Commercial insurers raise premiums to offset higher risk. Claims are becoming more severe – and more frequent. It’s becoming more expensive to fix business property, from cars to structures. Inflation, tariffs, and other factors are increasing replacement costs for insurers, and they need to raise premiums to keep up.
Ransomware & Breaches: Some of the highest jumps have been in the cyber insurance space. Companies are facing more losses due to ransomware and breaches.
Tightening Insurance Marketplace Overall: All of the factors above have created a hard insurance marketplace. Insurers have tightened underwriting and raised rates to offset rising costs, rising litigation, and increased regulatory scrutiny.
How Smart Businesses Are Pushing Back
Insurance is an ordinary and expected cost of doing business.
However, that doesn’t mean you can’t save money on commercial insurance.
Some of the ways smart businesses are pushing back include:
- Shopping Around: You may have stuck with the same commercial insurer for years. But with rates rising, it’s more important than ever to shop around. Different insurers analyze risk in different ways, and some insurers prefer certain industries over others.
- Bundling: Bundling property, liability, and auto insurance under a Business Owner’s Policy (BOP) can yield noticeable discounts.
- Raising Deductibles (Carefully): Raising deductibles can reduce premiums today (but increase the cost of future claims). Does your business want extra cash flow today in exchange for slightly higher risk?
- Improving Risk Management & Safety: The less risky your business is to insure, the more you’ll save. More commercial insurers are reducing premiums for businesses with safety protocols, quality control procedures, security systems, and formal employee training. Some businesses are investing in “cyber hygiene” to reduce the risk of a breach, investing in audits and staff training.
- Reviewing Annually: Many businesses pay for more insurance than they need. Stay aligned with your coverage to avoid waste.
- Planning for Higher Premiums in Higher Risk Areas: Overall, the commercial insurance space is rising at a modest pace. Certain industries and areas, however, are facing hikes of 20% or more. Expect higher premiums if you’re exposed to natural disasters, legal claims, or accidents. Defective product claims account for more than 40% of all liability claims by value, for example, putting some companies at a higher risk than others.
Work with the Experts
At ClaimsMate, we help businesses navigate tricky claims and manage risk.
Contact ClaimsMate today for a free consultation. Whether dealing with a claim or exploring insurance needs, our experts work hard to ensure optimal outcomes and protect your business.
Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.
