How Tariffs Could Impact Business Insurance

Tariffs have a cascading effect on various economic sectors, including Business Insurance. The recent implementation of tariffs by the U.S. government on imports from countries like Canada, Mexico, and China has led to several notable impacts on business insurance.

Increased Operational Costs
Businesses that rely on imported materials are experiencing higher operational costs due to tariffs. For instance, industries dependent on steel and aluminum imports face increased expenses, which can strain financial resources. This financial pressure may lead companies to reduce expenditures in other areas, including insurance coverage, potentially leaving them underinsured and more vulnerable to risks.

Supply Chain Disruptions
Tariffs can disrupt global supply chains, leading to delays in obtaining necessary goods or materials. Such disruptions can result in missed deadlines, dissatisfied customers, and financial losses. These challenges increase the likelihood of business interruption claims, prompting insurers to reassess coverage terms and potentially raise premiums to account for the heightened risks. 
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Rising Liability Risks
In an effort to mitigate tariff-induced costs, some businesses may turn to alternative suppliers, which could compromise product quality. Inferior products increase the risk of product liability claims, necessitating a reevaluation of liability insurance policies to ensure adequate protection against potential lawsuits stemming from defective products.

Increase in Premium on Commercial Auto Insurance
The auto industry is particularly susceptible to tariff effects. Tariffs on imported auto parts escalate repair costs, leading to higher claim expenses for insurers. Consequently, commercial auto insurance premiums are projected to rise.

​Inflation and Economic Uncertainty
Tariffs contribute to broader economic uncertainty and inflationary pressures, affecting sectors such as manufacturing, agriculture, and technology. This uncertainty can lead insurers to adjust risk assessments, potentially resulting in higher premiums for businesses in adversely affected industries, even if no claims have been filed.

Recommendations for Businesses

• Stay Informed: Keep abreast of trade policies and assess their potential impact on operations.
• Review Insurance Coverage: Regularly evaluate insurance policies to ensure they align with the current risk landscape, considering adjustments to coverage limits or policy terms as necessary.
• Communicate with Insurers and Agents: Engage in transparent discussions with insurance providers about how tariffs are affecting the business, which can aid in finding tailored solutions to mitigate risks.

By proactively addressing these factors, businesses can better manage the implications of tariffs on their Business Insurance needs and overall risk management strategies. If you have any questions, please feel free to contact me. 

Jason Matison
Commercial Insurance Agent
Austin, Texas