Climate change, economic upturn, and altering needs are all contributing factors to consider when it comes to commercial property insurance. Citizens are heavily invested and certain about obtaining commercial property insurance because of these factors and the fear of financial burden.
According to reports, the global commercial property insurance market will grow at a CAGR of more than 10% between 2023 and 2028. In the US, the market for property, casualty, and direct insurance has grown faster than the US economy.
To that end, some interesting trends are emerging in the industry that are changing how commercial property insurance works. Let us take a look at them.
Green Buildings Are Gaining Popularity
Green building, as the name implies, is a popular concept that essentially means creating structures that are beneficial to the environment in various ways. This can include managing waste and energy consumption, and so on. The first green building in the United States appeared in 1992 in Texas, and the concept has only grown since then.
Firstly, it is critical to understand that green building insurance is not the same as standard property insurance. This is because green buildings contain equipment and segments (renewable energy storage systems and vegetable roofing) that do not qualify for or register under standard insurance. As a result, to fully protect the structure, special green building insurance is required.
Although green buildings have been around for a while, it is extremely difficult for insurance companies to properly evaluate them as these are built with newer materials and special systems for increased efficiency.
According to reports, green buildings can reduce cost premiums by more than 3-4%, which has become a major factor in their popularity, not to mention the environmental safety assurance they provide. As a result, it is not difficult to predict that this trend has the greatest potential for growth over the years. UN’s sustainable development initiatives also have a significant role in driving the trend.
Drones Inspect the Property
Property valuation has been a significant factor influencing insurance costs or claims for any commercial property. Cities, demography, past claims, and a variety of other factors play an important role in determining the appropriate valuation parameters. However, with the advent of AI and technology, property inspection methods are rapidly changing and evolving.
Drones are becoming increasingly popular for inspecting and assessing the extent of damage caused by natural disasters. This saves time and provides an accurate valuation, allowing affected people to receive the correct claim value. Besides, the constant occurrence of natural disasters has been a major challenge for residents and insurance providers. As a result, collaborating across the value chain to use these technologies has proven to be a lifeline for many.
According to a McKinsey report, sharing a quote may become easier and more effective in the coming years with the help of drones, AI, and IoT. In addition, thanks to emerging technologies such as drone inspection, more than half of claims activities will be automated. It would not be incorrect to say that InsureTech will play a significant role in how the insurance industry operates.
According to a KPMG survey, more than 60% of respondents believe that InsureTech will revolutionize the insurance industry in the next 1-5 years. These technologies will power the next generation of commercial property insurance, reducing risks and increasing value-driven output.
Parametric Insurance Solutions
Parametric insurance solutions are another game-changing trend in the commercial insurance industry. But what exactly does this mean? Consider your general property insurance: you pay a premium, a disaster occurs, you file a claim, and after an inspection, you receive the amount for property repair or re-establishment. But can disasters be anticipated, and premiums be set before they occur?
Many people have not received the desired claims for a variety of reasons, the most common of which is underinsurance. According to a report, over 27.5 million people were critically underinsured in 2021, a number that was lower than in 2019 but still quite high and concerning.
A good solution to such problems is to use parametric insurance, which pays a fixed amount of money to the victim based on the type of event that caused the damage. Instead of calculating the actual loss, the probable sum is calculated based on the calamity. For example, if a flood occurs in a particular area and is of significant magnitude, the insurance policyholder is offered a predetermined sum of money.
The best part about this solution is that everything is fixed, and nothing is left to subjectivity. This provides an excellent opportunity for both parties (insurance provider and insurance taker) to understand exactly how much they must pay or receive after a disaster. Given the frequency and severity of natural disasters, the future of commercial property insurance will see a significant increase in the number of people purchasing this type of insurance.
Custom Solutions for Better Coverage
Customized solutions will undoubtedly be a hot topic in commercial property insurance going forward. There has been a significant increase in the number of people who want an insurance policy that covers their valuables to the greatest extent possible. This can be accomplished through various add-ons or by providing comprehensive portfolio analysis for objective evaluation.
Every property has unique requirements due to natural disasters or man-made operational constraints. So, the demand for custom insurance solutions will only grow, given how important commercial property insurance coverage has become over the years.
Gonzalez Insurance has also been a vocal advocate of the importance of customized quotes for commercial property insurance. We provide an in-depth analysis of what a property requires in order to avoid any financial burden without any deductible liability. Contact us for a customized quote.