o thrive in today’s market, companies must understand and respond to trends that can make commercial insurance more difficult and expensive to obtain—especially in Alaska.

Take property insurance, for example. For the past five years, commercial insurance buyers have generally seen significant premium increases in the property market, driven by natural catastrophes, social inflation, economic inflation, increased reinsurance costs, and higher costs of claims, according to Anna Kohler, an Anchorage-based account executive with Parker, Smith & Feek, one of the fifty largest insurance brokerage firms in the United States.

“Insurance carriers had to do quite a bit of price correction and portfolio correction to become profitable again after many years of underwriting losses,” says Kohler, who specializes in property and casualty insurance. “Many property carriers pulled out of high-loss areas, such as Florida and California. Underwriters had to tighten terms and conditions and ask a lot more questions of prospective insureds before being willing or even able to deploy capacity.”

Alaska had more difficulty than most other parts of the country, in some ways, due to a limited number of carriers that understand the state and the risks unique to its geography, Kohler says. Rural locations, high catastrophe exposure (such as earthquake and wildfire), and even high crime rates in Anchorage exaggerated an already hard property market.

Property carriers are still looking for accurate valuation of property, good risk management measures, and more data around maintenance records for optimal pricing, Kohler says. But there is more capacity available in the marketplace, and carriers are starting to compete for clean accounts.

“I maintain a large book of complex property accounts, and responses from London markets specifically have indicated that loyalty and good risk management records can even lead to rate reductions in 2024,” Kohler says. “I will caveat that with the fact that the market is still vulnerable to unforeseen catastrophic events. Rural property, especially frame construction, remains difficult in Alaska, simply due to the lack of insurers willing to write in our state.”

Kohler is willing to allow for optimism in the property insurance market. “Things are looking up,” she says. “If commercial property owners are diligent about maintaining their property and work with a broker that is willing to put in the work to tell their clients’ story and broker the deal, there is coverage to be found.”

Anchorage broker Christopher Pobieglo is also seeing greater challenges securing commercial property coverage. Some carriers are exiting the marketplace in Alaska; others in this “hard market” have become much more restrictive in their underwriting, says Pobieglo, president of Business Insurance Associates, which sells a variety of insurance products from different carriers.

Some carriers, Pobieglo says, have become more restrictive with the type of business occupying the building. “For example, in the past you could write a lessor’s risk policy,” he says. “Now some of the markets have gotten concerned with who the tenant is. If it’s an office or low-risk business, you can write it on a business owner’s policy (BOP), which includes some extra bells and whistles and auxiliary-type coverage. But an auto body business, for example, might not be eligible for a BOP; they might have to get on a package and may not get as good a coverage.”

Another major issue for insurance carriers in Alaska is snow loads on the roofs of commercial buildings. Snow collapsed multiple buildings during the past few winters, so carriers are asking more questions about snow removal practices, Pobieglo says. They are also placing more scrutiny on general building maintenance. “These carriers want to write best-in-class businesses and buildings,” he says. “And they want to see if maintenance and upgrades have been done to four main areas: the roof, electrical, plumbing, and heating. If you have not done upgrades to these areas, you could have a difficult time getting adequate coverage.”

Commercial auto insurance is essential for companies that own or use motor vehicles, but coverage is still somewhat of a tough market for insureds with large fleets, Kohler says. Auto carriers are subject to “nuclear verdicts” and the high cost of medical care.

“As we have continued to climb out of the pandemic era, we have more cars on the road, more distracted drivers, more incidents, and an ever-increasing cost of claims,” she explains. “To add insult to injury, many commercial operations who need a fleet to maintain their operations and/or grow are facing major staffing shortages. This can lead to a lowering of standards for new applicants, and drivers with less experience are brought on, causing an increase in numbers of accidents, pushing up the frequency and severity of auto claims.”

In addition, the evolution of electric vehicles with expensive battery components and complicated electronics in newer cars has increased the cost of repairing or replacing a vehicle. “Even companies with decent loss records continue to see double-digit rate increases this year,” Kohler says.

The application of AI is also affecting auto insurance, even before the advent of self-driving vehicles. “Although it seems that Alaska is a bit behind the curve when it comes to technological advances, we are definitely seeing a trend of telematics among fleet owners as well as fleet management software—companies looking to control losses by monitoring drivers via dash cams, speed tracking, seatbelt usage, et cetera,” Kohler explains. “I do not personally have clients who have yet implemented any AI technologies in their fleet, but there is certainly a buzz in the industry about new AI devices that can read driver facial movements or do eyeball scans to check for exhaustion or impairment allowing for additional safety measures to be taken.”

Auto insurance, Pobieglo says, is definitely a “pain point” for companies, especially those with extensive fleets. Auto insurance rates have risen 5 to 10 percent every year for the last four or five years. What’s driving up the rates? It’s primarily social inflation—behavior trends that raise the likelihood of claims—and the fact that auto commercial insurance is a high loss ratio for carriers, meaning they pay more for claims than they collect in premiums. “It’s not a big money-making line for carriers,” he says. “If you can package your commercial auto insurance with a carrier who’s writing your other insurance, you can get a more competitive rate.”

Litigation costs are also escalating auto insurance rates, along with the cost of vehicle replacement, mechanics, and auto body shops. In Alaska, auto coverage is a particularly tough line of business, partly because the weather and seasonal factors can hamper driving conditions. “The rates have gone up a lot, and it’s caused some owners to have fewer vehicles and go to higher deductibles,” Pobieglo says. “But making these adjustments can lower the commercial auto exposure for a business.”

Fleet insurance has always been hard to come by—and it’s not getting any easier, says independent broker Tracey Parrish. The difficulty is largely due to all the variables involved with having a fleet, from how the maintenance is being done to who’s driving the vehicles. “It’s a higher risk,” says Parrish, who owns Anchorage-based Alaska Pacific Insurance Agency (APIA), which represents various insurance companies in twenty-five states.

Commercial auto insurance is shifting, too, because of AI on the carrier’s side, which automates obtaining quotes online. Consequently, carriers are increasingly requesting verifications. “If the data on you doesn’t feel right, they will do a verification,” Parrish says. “They will want to see proof of your address, a picture of your vehicle, the title, and registration.”

Insurance carriers have been hit with a significant number of claims, and they are going through the verification process for higher-risk people. “We’re not used to this, but we get it,” Parrish says. “The carriers are trying to control their costs and risk. But it slows down our binding process.”

Not only should companies have sufficient insurance for their property, but their tenants should also carry coverage. That’s why APIA strongly encourages owners to ensure their tenants have insurance. “In our office, we try to have our landlords make sure their tenants are insured and lists them as an additional insured,” Parrish says. “This enables the landlord to know everything about that policy, such as if the tenants cancel, raise, or lower their coverage—or do not renew their policy. If there’s a claim, they don’t want to find out then that the tenant does not have a landlord’s policy.”

Unfortunately, few landlords in Alaska require their tenants to have this type of insurance. But if the tenant does have coverage and there is a claim, the landlord might not have to pay. Having a landlord policy provides double coverage. “You’ll use the tenant’s insurance first, and if you need more, you use your own,” Parrish says.

Another requirement that’s beginning to expand for landlords is the need for cyber liability insurance. According to Kohler, this trend is driven by the increase in “smart” buildings and a more creative approach to “vacancy” language in a property policy due to the recent growth of remote work or shared “rented” office spaces.

“In catastrophe-prone areas, property owners are taking a harder look at non-traditional risk financing methods, such as parametric solutions, self-insurance, and various new Insurtech products that don’t fit the bill of ‘traditional’ insurance,” Kohler says. “Ultimately, landlords need to point their focus toward continuous maintenance, disaster preparedness plans, and true property valuations, factoring in inflation, supply chain, and labor if they want to ensure they are adequately mitigating any potential losses they may face.”

Cybersecurity risks have also increased demand for cyber liability coverage in the healthcare industry due to the amount of protected health information that is being stolen. “More industries outside of the tech world are looking into technology errors and omissions coverage as they start to dabble in tech-related operations,” Kohler says. “More and more organizations like my own are driven to create a technology-specific specialty due to constant technology advancements that are hard to keep up with.”

Pobieglo says there are also notable shifts with insurance for the construction and transportation industries. “You’re seeing more requirements for pollution coverage, related to the increased regulatory environment surrounding that. It could also be related to cultural views related to the environment,” he says.

In addition, Pobieglo says there are more independent consultants requiring insurance today, possibly because of job loss from strained government budgets. Insurance needs are also increasing with the expanding presence of medical facilities and assisted living housing to serve Alaska’s aging population.

Parrish has noticed a growing number of people who work for general contractors going solo and becoming subcontractors. They know their trades, but that’s all they know; many subs don’t understand the complexities of workers compensation insurance, licensing, bonding, and other requirements of operating a contracting business. “They don’t have anyone to help them with their paperwork—-to make sure they are in compliance, understand insurance coverages, and can afford their insurance,” she says.

As a result, APIA diligently educates subcontractors and other clients about their basic and industry-specific insurance needs, according to Parrish.

Insurance is always evolving in response to emerging risks and litigation, Pobieglo says. “Insurance is a response to litigation; if there were no attorneys, there would be no insurance agents,” he says.

Underwriters are getting better and better at assessing risk, due in large part to technology. “For example, we have a commercial auto carrier who’s getting more into technology in terms of encouraging the use of devices in vehicles that allow owners to monitor driving habits,” Pobieglo says. “It’s not for everyone (due to potential privacy concerns), but if people are open to these monitoring devices, they can save on premiums.”

Kohler also cites technology as a driver of insurance trends. “In 2024, the biggest challenges facing the commercial insurance industry revolve around inflation, staffing and talent retention, the entrance of new technologies and AI, as well as an ever-changing geopolitical environment,” she says. “Advancements in technology, big data analytics, and the need and even expectation for instant data from the insurance buyer will also lead to changes in the industry.”

There are several adjustments in coverage and other areas that Alaska businesses can make in response to the current trends. General contractors, for example, can ensure their subcontractors have workers comp insurance and that they are listed as additional insured, Parrish says. “They should make sure they have someone in their compliance department to ensure all their subs are in compliance, their license is up to date, and their liability insurance limits match the general contractor’s limits,” she says.

Another major strategy for companies that own property, Pobieglo says, is to make sure they have appropriate replacement cost values, which have grown significantly in recent years. “The last thing you want to do is have a loss and find out you don’t have enough money to rebuild,” he says.

Commercial auto continues to be a major area where companies can refine their strategic approach. As a key tactic, they should reconsider what they actually need to operate and adjust accordingly. For instance, they can increase deductibles in auto, property, and general liability to have more skin in the game. “There’s obviously a premium benefit for a higher deductible, but you’re also not turning in a bunch of small claims,” Pobieglo says.”

Strategic adaptability is key, Kohler says. Last year’s strategy may not be ideal for this year’s economic and market environment. So, businesses should get creative. They should partner with someone creative who can look at the overall risk profile of the organization and strategize how to mitigate risk while keeping in line with the organizations’ financial goals. She says, “Insurance is not always the most exciting topic but invest your time in understanding the options so that you can make informed decisions around risk.”