Examining middle-market company dynamics in insurance

For middle market companies, the first half of 2023 proved to be a time of double-digit growth despite some challenges, according to the Middle Market Indicator - Mid Year 2023 (MMI) report from Chubb and the National Center for the Middle Market. 

Produced twice a year, the research report surveyed 1,000 middle market executives in June 2023, examining topics such as their insurance needs, emerging risks their companies are facing, technology concerns, as well as the protection strategies they are employing.

Ben Rockwell, division president, Chubb Middle Market, shared in an interview with Digital Insurance that the company releases a similar report every six months. "It focuses on the middle market and I'm happy to see the continued optimism in this sector," he said.

The study found that there are several factors creating some uneasiness for companies and in some cases, they are increasing their coverage limits to mitigate their exposures. 

The impact of inflation

"Inflation is definitely one of the top concerns, and we have seen it consistently for the last 12-plus months," explained Rockwell. The study confirmed that inflation affects companies in several ways: it drives up replacement of insured assets that are covered by insurance and it is affecting businesses' ability to replace their covered assets under their existing coverage limits. 

Rockwell added that agents are reviewing statements of value at renewal time to help ensure that companies have the appropriate coverage for their exposures. "We especially see it on building coverage…Valuation can be tricky depending on the type of building such as whether it's a green, leed or historical structure. Sometimes, we bring in consultants to help with the valuation."

Investing in AI

Artificial intelligence (AI) is another factor these businesses are watching. According to the report, middle market companies recognize that technology will play an important role in their organizations and are exploring how these technologies can be integrated into existing business models. 

Sixty-two percent of the respondents said that AI is extremely or very important to their firm. Another 30% of respondents said they are currently testing or using AI, and 38% are exploring the possibility of implementing it in their company.

"There is risk in its use," said Rockwell and he emphasized the importance of agents and brokers reaching out to Chubb with any questions. "We want to make sure the coverage is appropriate for the risk. Usage and adoption of AI varies by business sector too," he added. "It will be transformative in some sectors and others are still trying to figure out how they can use it." 

Rockwell finds that the use of various Internet of Things (IoT) devices is the next frontier for insurers because they allow carriers to become more proactive in helping customers prevent costly losses instead of just reacting to their aftermath. "We are moving from repair and replace to prevent and prepare," he said. An example is providing policyholders with sensors that can issue alerts if there is a water intrusion or leak in a building. In commercial settings such schools, manufacturing facilities or healthcare arenas, this can result in avoiding losses that could cost millions of dollars and disrupt operations for weeks or longer.

Workforce challenges

As some recession and supply chain fears have receded, workforce concerns are still affecting middle market companies. The study found that 54% of these businesses anticipate talent challenges in the next year, an increase from 48% at the end of 2022. "Workforce challenges have been a recurring issue including finding, growing and retaining talent," concedes Rockwell. He said that automation has become more relevant to the workforce and it requires a different skill set for some workers. 

The study showed that 19% of firms were concerned about staffing, hiring, talent acquisition and recruitment, while 15% were worried about employee retention and turnover. 

Rockwell said he anticipates that middle market firms will continue to see growth well into 2024 and that companies should feel strong about their operating environment and the opportunities ahead.