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Why Is the Cost of your Business Insurance Going Up? In order to answer that question, one must first know what are the major challenges that the insurance companies themselves face. Most insured’s do not realize that their insurance company is first and foremost an investment organization. Essentially, they take on risk of others in order to collect premium. Those dollars are in turn invested in large volumes into the investment markets in order to add to the company’s ability to generate profits. Historically property and liability companies have lost money on actual claims to premium. However, as an institutional investor, they have the opportunity to significantly change that picture with favorable investments. These companies did remarkably well during the 1990’s with historic return on investment. Many foreign insurance companies underwriting in the United States not only invested, but also went strong in equities due to their great return, neglecting to balance their portfolios for harder times. These good times all came to a screeching halt in early 2000 as the economy slipped into a somewhat anticipated recession. Many stocks had been over valued and the recession required investor’s to take a close look where their money was located. This caused a significant bear market, which we have been in since that time. To add to these insurance companies woes, September 11 caused not only the U.S. economy to stumble further, but the insurance and reinsurance losses were enormous. The final results have been little if any profit from either, insurance underwriting or investments, causing a decrease in insurance company surpluses thus diminished ratings. This all equates to much higher insurance premiums for the consumer. W hen might we see an improvement in this situation? Improvement will not come until the economy improves. The economy continues to stumble due to disappointing industrial profits and the uncertainty in international affairs. Until then, plan on increasing costs and on working with those insurance agencies like Bates & Associates that have the insurance markets available to them that can assist you during tougher times.

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