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Insurance premiums increase for businesses and commercial properties can be skillfully mitigated by experienced broker such as Rick Callaway to save money.

Insurance Premiums Increase for Commercial Properties & Business Liabilities – How to be Adequately Insured without Over Payment

Insurance premiums for businesses & commercial properties keep rising, Rick Callaway’s insights on why & how to be insured without over paying.

The following is a slightly edited transcript of a podcast interview of Rick Callaway, by Maurice Washington. 

Maurice Washington  00:28

Hello, my name is Maurice Washington, I want to welcome everybody to another episode of executive talk. Those who are watching live on LinkedIn on Facebook or listening later on podcasts are now streaming on our Roku. Thank you guys for joining us. As you guys know, right now, in this day and age, we’re having a lot of challenges facing everybody. We have inflation that’s increasing. We’re having prices all over the place, increasing in the grocery stores, gas prices, we have a lot of things that we’re facing as a society. But one thing business owners are facing right now or commercial insurance premiums are on the rise. And it’s one of those situations that we’re starting to see a trend where it just seems like it’s continuously increasing with I don’t know, do we have an end in mind? Well, with me today, I have Rick Callaway with me to address what’s going on within the commercial insurance premiums and figure out what’s going on. So let’s go ahead and bring Rick in. Rick, how are you doing today?

Richard Callaway  01:30

I’m doing just great. My Christmas shopping is all done. Presents are all wrapped. And I’ve still have money in the bank

 Maurice Washington  01:36

Christmas shopping. Joy’s time of the year, I get it.. We’re coming into the new year, we’ve had a great year 2022. We’ve had a lot of changes. We’ve had quite a few shows and things that we’ve addressed with, you know, far as what’s going on with commercial insurance. But I know today, this shows a big topic. And I know probably a lot of your clients are, I don’t know, maybe even a little bit frustrated right now with what’s going on with the commercial insurance premiums. Does that sound right?

Richard Callaway  02:06

Or are my clients frustrated? I’m frustrated as in the worst market I’ve seen in ages, premiums are going through the roof. It’s ridiculous.

 Maurice Washington  02:16

Yeah. And yeah, so speaking of agents, and let’s go ahead and date this back. So you’ve been in the industry for how long? So what kind of, compared to when you started versus now, what kind of increase Are you seeing?

Insurance Premiums Increases in Commercial Insurance by 25%, 30%, 40%

Richard Callaway  02:28

And we used to see 2 and 3% increases. Now I’m seeing 25% 30% 40%, I got a quote on a property today, which would have normally been $20,000, was $85,000. And that was the best quote I got. Wow. Nice for my pocketbook, but not so good for the clients.

Maurice Washington  02:48

Right, right. And so within this timeframe, so let’s take this historically back when you started versus now, are you seeing a decline in the type of businesses that are better able to write? Or are you starting to see an increase because there’s so much, so much more variety, now?

The insurance marketplace is shrinking, carriers are moving away from particular areas of the country & particular types of business.

Richard Callaway  03:11

That’s another problem. The marketplace is shrinking, carriers are moving away from particular areas of the country, particular types of business. And it used to be you could get a quote from multiple companies for multiple for the same risk. Now, you’re lucky if you can find one company that wants to quote a particular risk. You know, they’re a for profit business. And they’re going you know what, this isn’t such a good risk. For me, it’s customary money, maybe I won’t write that this year.

Maurice Washington  03:36

Yeah. That’s it. And then that’s where I want everybody to really hone in on as far as what we’re about to introduce to everybody that’s watching here is that things are changing all the way through and through, we’re getting more innovative, we’re becoming more creative with our business models and things that we’re doing and insurance companies and our business models is almost not clicking. There’s not a conversation about not getting business insurance. It’s just now we need to really start thinking about what we’re getting insured for and how our business models are responding to this. And here’s one of the things that you know, Rick, as you’re aware of climate change, as stated, but just let’s just go ahead and mature it and put it in mature mode if the climate is changing, right? I mean, things are getting to the point where we didn’t have a lot of these issues before. So I don’t know what are your thoughts about how things have even changed in that arena?

Climate change is creating lots of risks

Richard Callaway  04:33

Climate change not only seems to be happening, but it’s also a political issue. So it’s going back and forth. So we’re having bigger storms, more storms, all of the global warming. I don’t know what that affects, maybe the tides are going to rise but something is changing, and it’s definitely affecting the weather.

Maurice Washington  04:52

For sure. And here’s a couple articles. I want to go ahead and take us back a little bit of history and also bring us back to the present day. Um, we have this article here on And this is going to date back to 2021, which is in the first half of 2021. Disasters inflicted a staggering 42 billion in losses covered by insurance, a 10 year high. Then a September hurricane Ida, if everybody remembers that cut a path to destruction through the Gulf Coast and flooded neighborhoods from Louisiana to New Jersey causing insured losses, it now ranks among the top five costliest storms in US history. also states that the Atlantic hurricane season isn’t still isn’t over. And California is on fire season and has yet to enter its peak. So the total damages are poised to rise even higher. Insurers are still tattling damage totals from wildfires in the US West this year. But last year, fires cost insurers 13 billion. And so just even that here, Rick. That is, I mean, it seems like that 42 billion, it seems like all these events are happening due to weather in the billions. It’s not like it’s, you know, a millions assistance is out there, millions, billions, trillions.

Richard Callaway  06:16

A million here a million there, pretty soon he got real money, and he got billions of dollars, that was $55 billion worth of losses. And that doesn’t even include the other types of losses. Right? So insurance companies have a big pot of money that they have to keep full, to be able to pay all of these claims. It doesn’t matter whether it’s a hurricane, a fire or an earthquake, it’s still only one pot of money, somehow they have to get money back into that pot. So they continue to plague claims. And there’s only a couple of ways to do it, one, increase rates in other market altogether, or hopefully their investment options do well, 

Maurice Washington  06:51

for sure. And so that was in 2021. That was Hurricane I just recently here in 2022. We had hurricane Ian, right?

 Richard Callaway  07:03

That’s correct. You know, the men have to outdo the women. There’s the female name in the male name of the hurricane. And we managed to bring that one in at a mere $50 billion, $8 million higher than the previous high. That’s a lot of money. 

Maurice Washington  07:20

Yes. And so recently, you saw how many insurers moved out of the market of Florida when that hurricane hit this year.

Richard Callaway  07:28

I don’t know if there’s anybody left in Florida, the only people riding in Florida are probably what’s called carriers in excess and surplus lines by nature, how they look at risks and other carriers. Right? And because you’ll be a little looking at them, they collect a pretty penny for that as they should because they’re taking the big risk.

Maurice Washington  07:49

Gotcha. All right. So that’s, that’s number one. So we’re talking about climate change. And another thing that’s hitting us as a society is construction costs. And I don’t think really, we really caught up to what’s going on with construction, because again, it was at a point where things were fairly good. But then I think COVID has a big factor to do with COVID. And how the industry has changed there, right?

 Richard Callaway  08:15

Absolutely, you know, COVID hit, no more construction, people producing construction products, obviously didn’t need to produce them. And now it’s starting up again. And now we’ve got the reverse problem. We’ve got no supply and demand. So we all know what that means is higher prices.

We’re seeing construction costs increasing in building material prices

Maurice Washington  08:38

Yep. Let’s go ahead. And I’m gonna bring up this article. I think everybody may have seen this and those who have not seen it, for those that are listening to podcasts on point Say construction costs rising in 2022. Here’s why. Here’s why it’s happening. So we’re seeing construction costs increasing in building material prices. Inflation due to the increase in money supply, chasing the same productivity and output, which has resulted in some of the highest inflation in 40 years. labor costs are rising as workers demand higher wages in response to the increased cost of living and lack of skilled laborers in the workforce. rising interest rates make it more expensive to finance construction costs. So this is suggesting that COVID-19 affects construction costs, we have supply chain disruptions, gypsum products, paint, ready to mix concrete transport of freight. And so these are all relative to what’s affecting construction right now. So would you like to elaborate on it?

Richard Callaway  09:49

It’s obvious as our costs are going up, lumber has gone up like 40 or 50%. You take all of those things on top of each other. First of all, we’ve got load supply And then the supply chain disruption, we can’t get this stuff. And then if we actually get it to where we want it the cost to deliver it via truck, diesel, whatever is higher. So it’s almost impossible to control the costs. The contractors admitted the job before COVID Figured their costume was $200,000. Now that same product, the same pricing is probably four to $500,000. Which is because the end user has more money and that affects the replacement costs. If there’s a building that burned down years ago, we can use maybe 100 $150 a square foot for replacement costs. Now in San Francisco, it’s over $600 a square foot replacement cost rather large chunk.

 Maurice Washington  10:54

That is, it is large enough. And one of the things I have a CPA that told us and one of my other shows here, he told us to look out for the price of diesel. And that is like an indicator as far as inflation is concerned. You can actually kind of figure out where that is, but also that price of that diesel that has a direct line with shipping and from trucks and delivery, right?

 Richard Callaway  11:17

Absolutely. I mean, talk about diesel, talk about gasoline, people are happy now then only pay $5 a gallon. I used to fill my car up for $5. People are happy with that. That’s how much prices have increased and people get used to a price they don’t realize $5 is a big number or death. A quarter a gallon. That’s right. Yeah, it’s getting wild out here. Again, these are part of the reason why we’re starting to see these commercial insurance premiums because everywhere is being touched on every detail is being increased. I feel like that is a common theme here. Let me go ahead and bring this up here. 

Construction cost is forecasted to be increasing due to labor costs and supply chains

This article had a heavy pretty interest in this from And this is CBRE says Get ready for the highest construction costs increase in years, reported this week that the forecasts and increase in construction costs of 14 1%. That’s likely to be the largest in several years. They’ll relieve might be on the horizon, which is good news. Developers point to higher labor costs and supply chains as major culprits; they are sometimes forced to adjust projects and hope the subcontractor pool expands. Some say client and supply provider communication is critical to working through these challenges. So now, one thing that this alludes to within this construction issue is the workforce is the labor, we are finding and I’ve talked to quite a few people that are saying that we’re still having a we still have the work out there. But as far as finding good contracts, contract laborers, and actually just laborers in general, is not happening as it used to be where it was very easy to keep that, you know, keep that pool going.

 Richard Callaway  13:09

People are coming back to work very slowly. One because maybe they’re comfortable with the income they have now and they’re still scared of COVID they don’t want, you know, they don’t want to get sick, they’ve got families, and three, and COVID struck. A lot of folks said, you know, I can do this on my own. So they started their own firm, which may be competitive with the guy that used to hire them. So we’ve got a shrinking labor pool, which again, our supply and demand theory knows no supply to keep up with the demand. So it’s going up to 14%. Yeah, I think that’s about half of what it’s really going to be. I think it’s going to be more than 20% of the 8% increase. That also depends on what state you’re in, it’s a whole lot cheaper to build a home than to try and build one in California. 

Maurice Washington  14:03

About the percentage of California What do you think that looks like?

Richard Callaway  14:07

That’s, that’s 28 to 30%. So when you average that number all across the country, it might be 14%. And if you were to look at location by location, Washington, DC, New York, California, all 35-40% increase, Ohio, you know, 10% increase.

Maurice Washington  14:32

And so I think that’s also another thing that we’re seeing within business owners is that depending on the market, depending on the state that you’re in, you may be playing, you know, just more in California versus Colorado, depending on the marketplace. Absolutely.

 Richard Callaway  14:49

Just the cost of doing business, whatever state you’re in, there’s not set rates but average rates for what things cost there that you know, if you have a lower demand and more supply. And your price is going to be demanded. But if you’re demanding, like in California, you build more and more construction, less and less supplies, less and less labor, you’ve got a big, big increase. And insurance companies are aware that they look at the pricing of premium for someone in California versus pressing one somewhere in the Midwest, the premiums are significantly different. But now, they’re probably not quite as far apart as they used to be. Because minimal $55 billion losses that are happening are eaten up by their money. So they have to be careful with what they do. 

Maurice Washington  15:40

Now, and that’s true. Let me ask you this. So when insurance companies are seeing the trend of things, do they plan out maybe six months ahead and project out a certain number as to where things might be just to cover their costs? Or is that that? What’s the mentality behind that?

AI can be a bane to insurance industry and the insured

Richard Callaway  15:58

I’m sure they predict something to try and figure out the cost they’ve got. Insurance is based on analysis and figuring out what the risk, isn’t how much the cost is going to go up. I’m sure they all have plenty of analysts that look at things, they’re using a lot of AI. Yeah, figure out what they’re gonna write, and what they’re not gonna write. Unfortunately, I’ve run across a couple of times where the AI said one thing when in reality, you know, the building wasn’t what the AI thought it was. But management says if the computer says you can’t write this, because it lets it know what we’re writing. So that’s become a bane to the industry. The insurance companies, tough on us producers, in the old days, we can ask old days meaning two years ago, for God’s sakes, we can ask the underwriter to take a look at the building. It’s not, you know, it’s, here’s what it looks like it’s well kept up. That doesn’t seem to make as much difference as I look at when it was built. That’s it, you know, you can have two buildings that were built at the same time, but one of them was upgraded, and a lot kept it up. And it’s a much better risk. If you’ve got an owner that maintains a building, it’s a much better risk for the insurance company rather than the guy that says, Oh, I own a building. I’m gonna get tenants in there and forget about it. And we talked about that in our real estate show.

Inflation and a bear stock market increase costs of insurance

Maurice Washington  17:16

Yes, right. That’s right. One of the things I wanted to bring up is and this is a common denominator for everybody. And it’s that word that is the biggest AI word that everybody’s really, really responding to, which is the inflation. I want to go ahead and pull up this article and get your feedback on it. So says US inflation is high and expects strong insurance inflation to follow. So in this article, and even just the title in itself, I don’t you know, for me, I don’t really understand this. So again, that’s why I want you to address it. But in this statement, it says PNC Insurance Claim settlements are directly affected by economic factors such as trends and their cost to replace damaged property, the cost of repair parts, the cost of medical services and drugs, salaries and wages in economic terms. claim costs for loss and loss adjustment Expenses are the cost of production for the insurer. Insurance major claim costs include physician services and other medical expenses, hospital care and rehabilitation, lost time and wages, automobiles, including repairs, and parks, building materials and construction, labor, and personal effects. The components for loss adjustments, expenses are those incurred by insurance companies, and sudden claims, i.e. legal fees and other legal court costs. So it seems pretty explanatory, but break some of that down for us. As viewers, you know, people may be struggling with that,

Richard Callaway  18:51

well, there’s probably two pieces to the inflation part when inflation happens, stock prices don’t seem to do as well. And insurance companies make a part of their revenue from investments. So with the investment, revenue down, they’ve got to increase the rates and then where they talked about the inflation cost is what we talked about a little bit earlier, cost of doing business for a construction company is going up. So therefore, workers comp prepaid doctors, etc. So therefore, the cost of all these things are dragging their premiums. If it costs $1 to fix something today, I can charge 25 cents in premium, if it costs $10. For the same thing today, I’ve got to charge, you know, $10. For the same thing, everything and surance companies have to figure out what their costs are going to be for a particular risk. And that not only does that include, you know, the cost of material, the cost of a doctor, they’ve also got the cost of what they’re paying their adjusters, what they’re paying and legal fees. And every now and now it seems like every time there’s a claim there’s a lawsuit, so that drives the cost. So that’s right. Used to be okay, your building burned down, I owe you $2.75 Done. And now we get a lawsuit saying, Well, I think you should pay us $5. And then that stretches out. And eventually they come to a number. But I don’t know a lot of attorneys that work for free. So that’s costing the insurance company money. So that’s all factored into the cost. They’re probably one of the best at factoring in what their potential costs are. If they were not. They’d be gone and out of business already. They’re dealing with metal, panning off billions of dollars worth of damages. That’s obviously not one company, but it’s spread across all the companies. So they must have figured the risk. That’s why they’re leaving Florida, they’re gone. We can’t afford to do this anymore.

 Maurice Washington  20:51

Yeah, because Florida is one of those states where it’s just that’s a dead horse when it comes to Florida, because we all know, but it seems like Florida. Every year has some kind of hurricane coming in it is

 Richard Callaway  21:05

They’ve got hurricanes every year, but they are never really as disastrous as they are now. I mean, that’s leveling everything used to come in and kind of drop in and knock over a couple of buildings and drop back out. I think I read the winds were at one point up to 155 miles an hour. That’s pretty healthy when?

Ransomware, cyber attacks create stacking effects that drive up the cost of doing business, especially for small businesses

 Maurice Washington  21:25

Yes, it is. Yes, it is. All right, for Florida, poor Florida. Let me go ahead and bring up this last article here. Because this is another thing that we’ve had a show about. And again, it just keeps on popping up. So again, this is where we need to hone in on where these things are, so we can be proactive about them. But we have this when it comes to cyber attacks. We are seeing cyber attacks now. State level weapons disrupt, disrupting everyday lives with ransomware. The number one threat since checkpoint software is 2020 2022 cyber attacks transmit your report. So we’re talking about the saying that global increases in cyber attacks. In the first half of the year, there was a 42% increase in weekly cyber attacks globally, with every region experiencing a significant escalation. We have cyber attacks and trenching at the state level. Weapons ransomware is the number one threat. This year ransomware actors have stepped up to nation state level, targeting the entire countries of Costa Rica and Peru. The huge potential for financial gain means that ransomware is going to be around for a long time and will only get worse incident responses and cloud supply chain attacks. And so not only to start at the bottom here, not only of the supply chains in general coming into a place of inflation and whatnot, we’re now they’re actually being attacked from a cyber perspective. 

Richard Callaway  23:02

Cyber is a major problem. And ransomware is the biggest problem, because it’s not really technology. Ransomware itself is technology. The ransomware doesn’t get in there unless a human being clicks a link that they shouldn’t link. Don’t you have to train staff not to do that. But no, we’re human, something happens, we still click it. So they’re shut, they shut it down a trucking line, they can’t route their trucks from point A to point B without the software anymore. States are getting shut down. So we can’t even ship through a country because the entire country is set down in you know that cost for so there’s a cost incurred the incident response, I have to get somebody in there to do what they got to do if I’m not going to pay the ransom, where we’re figuring out how to pay the ransomware. All of those things affect, again, costs of doing business. I can’t get my lumber because the trucking company cannot get it to me because this system is shut down. That’s right. I’ve got an increased cost. And then number two, Mr. trucking company just lost revenue. So guess what his next shipment has to up the price to make up for what he lost. So it’s a, you know, it keeps stacking and stacking and stacking and stacking one, one event on top of another. And they all impact the consumer at some point, whether it be insurance premium, the cost of their toaster, cost of gas, cost of anything. All of these things are being impacted and it says it’s going to be worse this year. I certainly hope not. But I’m not a ransomware tracker or a ransomware person, but it’s going to affect the smaller businesses much more than a larger business. Because smaller businesses are less sophisticated with their protections. They may not, they’re busy running their business. They don’t have time to educate their employees and say you know when you see a link Common Sense don’t recognize, don’t click on or double check something and the human factor in this cyber attack is bigger, and cyber people hacking into a system and doing something. They rely on us humans to help them out.

 Maurice Washington  25:16

Yeah, that’s right. You know, when it comes to the trend to buy everything that we have discussed, there’s every issue, every loss is in the billions. The trend is always in the billions. So if we look at this, and we Insider, and it’s all an explicit bias, and then we have weather, and this only school exclusive box, they’re always there in the billions supply chain issue is all in the billions. So we I think, coupled with all three of those things, you know, working against per se, your insurance company, they have no choice but to increase prices to maintain these billions of losses billions of dollars in losses.

Rick Callaway Commercial Insurance Team leverages technology to find the most fitting policies – no under coverage, no over pricing. 

Richard Callaway  25:59

That’s a very true statement. That’s why I spend all of my days now searching different companies trying to find one that requires a particular risk and trying to define the risk properly, to make sure I’ve got all the right criteria for that company. So they’re not paying for something that they don’t really need. And staying on top of it, I don’t know how many feeds I get in on a regular basis, but I track what’s going on in the insurance industry, to see who’s insuring what, who’s not insuring what, what’s happening. And that’s what you have to do in the age of technology, you have to take advantage of that technology to help you out because insurance companies are using the technology, the ransomware people are using the technology. So I’d be pretty foolish not to be using the technology.

 Maurice Washington  26:46

So what is what’s the final thoughts here to write? Because it seems like you’re almost coming to a loss as to what to do. And you know, I know that business owners are looking for that. We told them why today, but what should they do now, what do you know, how should they go into the new year?

Experienced commercial insurance broker like Rick Callaway know how to use information to lower premiums

 Richard Callaway  27:03

The most important thing is they have to work with a broker that has been around for a little bit, notes how to research the information for their coverage, make sure when a broker asked you the question for your upcoming renewal? What are your sales? On this product? You have all of those questions, be sure you get the answers back, because last year, you might have had $10 million worth of sales. So your premium was based on that this year, you may only be down to 5 million. So hopefully your premium goes down. But if you don’t give him or her the information, they read it up based on the information they have. And that may not be to your benefit. Information is king in this business, you have to have proper information to get proper premiums, and then a large hammer beats the insurance company over the head.

 Maurice Washington  27:49

Yeah, that’s fair. Appreciate that. And I know the viewers do too. I’d like to throw this out here for all the viewers here. When it comes to this, obviously if you look at it from a SWOT analysis, this is obviously a threat because it’s an increase in cost. So the opportunity here, and that’s what we want to do at the end of the shows is turn everything into an opportunity and opportunity here is to talk to Jonah and like Rick and get things under under wraps with insurance and business insurance, it is one of those things you have to pay attention to or else is just going to move for you know, your business model and look at all these areas stay protected where you can, because this stuff is this get us only seems like it’s only getting harder out here to run your business and keep your creation going. So let’s be proactive at this moment. And that’s really the statement. And again, Rick has the time he has expertise to talk about these things. And that’s why he’s here. So I want to always Thank you, Rick, for your information and, and being willing to address these things for business owners. So thank you very much.

 Richard Callaway  28:53

My pleasure. All right.

 Maurice Washington  28:56

We’re about to get out of here. We both have to get back to work. I want to thank everybody for viewing today. We’ll see you next month. Talk to you later.

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