The Dangers of Being Underinsured & Potential Policy Impact
June 8, 2022
75% of commercial businesses are currently being underinsured by an average of 40% or more – per a recent CoreLogic statistic.
Approximately 88% of total loss claims since the beginning of 2022 involved vehicles that were underinsured. Year to date, this is up from 53% underinsured in 2021, and only 33% underinsured in 2020.
As the market for physical damage and commercial property insurance continues to face challenges— from premium increases to rapidly expanding demand— it’s crucial to keep in mind not only the factors contributing to these changes, but what steps your business can take to proactively address them. Underinsured values have become particularly prevalent, meaning motor carriers should take care to discuss vehicle and property values at the inception and renewal of their insurance, as well as throughout the course of their policy. Take a look at the key points below or contact a Cottingham & Butler representative to learn more.
With most physical damage insurance policies written on the lesser of the stated amount or actual cash value, the dramatic increase in vehicle values and repair costs results in many vehicles being under insured. The end result is companies and individual Owner Operators involved in accidents where the truck is totaled, are not getting enough money to replace the totaled unit with similar equipment.
The increase in the valuation of individual units is making current per location limits insufficient as well. If you have a concentration of vehicles at an individual location, please review those limits for adequacy as well.
With supply chain delays and costs of materials and labor increasing, it is likely that property values may be understated. Take a look at the price movement of building construction costs below, and note the enormous spike in costs for industrial and warehouse buildings. Be sure to proactively revisit your building values as well to ensure proper coverage upon renewal.
Rising inflation has ultimately increased the cost of goods motor carriers are hauling. Review the index below, and be sure to review current per load limits on cargo to be sure they’re all still adequate when compared to market increases.
Contact a Cottingham & Butler representative today for assistance on any valuation questions or changes you may have.