Why Your General Liability Premium Went Up — Even Without a Single Claim

You run a careful business. No claims, no incidents. Then the renewal comes in higher than last year. What happened?

General liability pricing isn't based only on your own record. It also reflects how much business you do, how your work is classified, and what claims cost across your industry. Here are the real reasons premiums go up, and what you can do about it.

1. Your business grew

General liability is usually priced on an exposure base: your sales, your payroll, or sometimes your square footage, depending on your type of business. If your sales or payroll went up, your premium goes up with them, even with no claims. More work means more chances for something to go wrong.

2. The premium audit

Many general liability policies are auditable. The premium you pay at the start of the year is based on an estimate of your sales or payroll. After the policy year ends, the insurance company checks your actual numbers.

• If your actual sales or payroll were higher than the estimate, you get an additional bill.

• If they were lower, you may get money back.

An audit bill is often what business owners mean when they say "my premium went up." Giving your agent realistic estimates at renewal, and updating them during the year if your business changes a lot, avoids a surprise.

3. Your classification changed

Every business is assigned a class code that describes the work you do. Different codes carry different rates. If you added a new type of work, or an audit found work that fits a higher-rated code, your premium changes. For example, a contractor who starts doing roofing on top of general carpentry may move into a higher-rated class.

4. Claims cost more for everyone

Medical bills, repair costs and legal defense all keep getting more expensive. Insurance companies price for the claims they expect to pay next year, not last year, so rates across a whole industry can go up even when your own record is clean.

5. Your industry had a bad year

Insurance companies look at results for whole groups of similar businesses. If businesses like yours in your area had more or bigger claims, rates for the whole group can rise.

6. The insurance company changed its rates or appetite

Insurance companies regularly update their rates and decide which businesses they want to write more or less of. A rate filing, a change in their rating model, or a decision to shrink their book in your industry can raise your renewal.

7. Credit and other rating factors

Where the state allows it, some insurance companies use credit-based scores and other data when pricing business policies. A change there can affect your premium even if nothing else did.

What to do when your renewal goes up

1. Ask your agent what changed. Rate, exposure (sales or payroll), class code, or coverage? Get the specific reason.

2. Check the exposure numbers on your renewal. Are the sales or payroll estimates realistic?

3. Check your class codes. Do they describe the work you actually do?

4. Review last year's audit, if you had one. Were the numbers right?

5. Ask about credits for safety programs, written contracts with subcontractors, or a clean claims history.

6. Shop it, but compare the same limits, deductibles and coverages. A cheaper policy with less coverage isn't a better deal.

7. Look at your deductible if you'd rather carry more of the small risk yourself.

FAQ

My business had no claims. Can my rate still go down?

Yes. If your exposure shrinks, your class changes, or rates in your industry improve, your premium can go down. A clean record also helps you qualify with more insurance companies.

Why did I get a bill after my policy ended?

That's usually the premium audit. Your actual sales or payroll were higher than the estimate the premium was based on.

Why did my friend's premium stay flat while mine went up?

Different industries, class codes and business sizes are rated differently, even in the same town.

Will switching insurance companies lower my premium?

Sometimes. Just make sure you're comparing the same limits, deductibles and coverage. Ask your agent to explain any differences.

Does a BOP work differently?

General liability inside a BOP is priced in a similar way. See our guide to BOP vs general liability and property.

Renewal went up and want a second look? Call City Insurance and Financial Services at (763) 582-1888 or contact us. You can also apply online for general liability.

City Insurance and Financial Services, Minnetonka, MN.