Insurance policies for new businesses tick upward
Insurance providers say they expect new business contracts to pick up even more in the future.
Michael Conlan, an adjunct sculpture instructor at the University of North Dakota, decided to take a risk last year. In his younger days, he was a skateboarder, and now his 14-year-old son – headed to high school next year – is one, too.
So, in the fall, he opened Flow Skate Shop in downtown Grand Forks. He said his son didn’t want to be tethered to the nearby mall anymore, or have to make the long round trip to Fargo for its dedicated skate shop.
“We just said, hey, why not? We’ve got a little bit of time on our hands. It’s the middle of the pandemic, let’s give it a shot.”
There are countless people like Conlan, all making big changes as the pandemic has reshaped American life. According to the U.S. Census Bureau’s count of new business applications, 2021 was a record year in the upper Midwest, just like much of the rest of the country. Across Minnesota, South Dakota and North Dakota combined, application numbers jumped 11% between 2019 and 2020; they jumped another 22% in 2021.
It’s all made for an interesting two years for insurance providers, who have felt nearly every effect of the pandemic – including work-from-home ripple effects to the far-flung influence of surging inflation. DJ Colter, an agency owner with American Family Insurance, points out that the change is notable.
“I had clients reach out to me here in the last week – she's a psychiatrist, they're looking to start her own practice (working) from home,” Colter said. “And she's like, hey, I know that if I have someone come to our house, it's a different liability if they get hurt.”
It’s similar for Ryan Hoffman, managing director of Fargo operations for Marsh McLennan Agency, who said he expects new business contracts to pick up even more in the future.
“We do consult with a lot of startup businesses. We're seeing a lot of immediate activity, because a lot of incubator businesses really start within a home,” Hoffman said. “And before they get off the ground, it will take some time before they develop into something more substantial to which they're going to need a risk strategy.”
But new business starts are just one way the economy has radically changed over the course of the COVID pandemic – with droves of employees now working from home, not to mention the massive whipsawing in supply chains that’s now wracking markets.
That shift to work-from-home, which is remaking the nature of the office across the country, has helped soften cybersecurity defenses, say Matt Peterson and Thomas Tweten, both officials with Bell Insurance.
“The two claims that we see the most would be ransomware claims, where somebody makes a ransom demand after they've (passed) software into your system to lock information or locked systems,” Peterson said, and added that the other is “social engineering” – where a scammer spoofs a bill or an invoice for a service that a recipient regularly uses.
“When people are remoting in and working from home, we’ve certainly seen an uptick just in general of businesses that had ransomware incidents or social engineering (issues),” he said.
Inflation has driven an enormous amount of economic change, too, with the federally tracked Consumer Price Index jumping 1.2% in March, and food prices up 7.9% across 2022. That surge in prices is affecting auto parts, too, Peterson said, driving up automobile repair costs.
“What we've seen is the cost to get an auto repaired (has) significantly increased. So insurers are paying higher dollar claims today for the same claim happening now versus two years ago,” Peterson said.
And, he added, if things keep changing, the insurance industry will keep changing, too.
“If that trend continues, we would expect that there's probably an auto rate increase of some sort in the future.”