Switching Carriers for Premium Savings Might Cost You More Than You Think

By: Michael Summers, Select Business Unit Manager

What looked like a smart financial decision turned into an expensive mistake.

A Virginia-based custom homebuilder decided to switch workers’ compensation carriers for a lower premium. Business was tight, and the savings looked good on paper. Same coverage, lower price — what’s not to like?

For the first year, everything seemed fine. Then the audit arrived. Because the new carrier hadn’t updated payroll figures to reflect the increased totals during the policy term — something the previous carrier handled automatically — the construction business was hit with a $12,000 adjustment. It wasn’t a penalty, just a catch-up. But there were no warnings, no payment plan options — just a single invoice, due in full.

For a small business juggling payroll, materials, and project delays, that kind of unexpected bill can throw off the entire month. Even a smaller adjustment — say, an $800 increase in premium — can mean choosing between ordering supplies or delaying a subcontractor payment. What started as a cost-saving move quickly became a cash flow crisis.

Stories like this are more common than you think. When policy premiums adjust, the instinct is to shop around. But chasing price can create more problems than it solves, especially when it opens the door to billing surprises or coverage gaps that small businesses can’t afford to absorb.

In today’s market, staying put might be the smarter financial move, and here are three reasons why:

1. Familiarity Prevents Gaps

When you’ve been with a carrier for several years, they develop a working knowledge of your business: how you operate, what’s changed — new services, added locations, or shifts in staffing — and where your risks are evolving. A new carrier may not ask the right questions or even know what to look for.

Consider a local wine distributor who, during the transition from one carrier to another, forgot to flag a large inventory of wine bottles they stored for another business. Their prior carrier had built that exposure into their policy over time, but the new one didn’t know it existed. When a claim was filed, the distributor learned too late that the inventory wasn’t covered. 

It’s the kind of gap that doesn’t show up in a quote comparison but becomes painfully clear when a claim is filed. Long-standing carrier relationships reduce coverage gap risk by ensuring the nuances of your operations aren’t overlooked.

2. Coverage Isn't Defined the Same Across Carriers

Just because two policies have the same name — general liability, property, umbrella, etc. —  doesn’t mean they offer the same protection. Each carrier may have its own definitions, exclusions, and assumptions. What looks like equal coverage on paper can function very differently in reality.

One common example is medical payments coverage: a no-fault, “goodwill” protection that helps pay medical expenses if someone is injured on your property. Some carriers include it as a standard part of their general liability policy. Others exclude it. For example, if you are the owner of a boutique, and a customer trips and falls in your shop, causing injury, medical payments coverage can be used by a carrier to provide some upfront medical bill assistance, regardless of any negligence on your part. This “no-fault” coverage can often help mitigate larger and costlier lawsuits.

Another example is property and premises exclusions. Coverage can get murky if your business spans multiple buildings or includes shared or adjacent spaces. The organizing body for a farmer’s market, for instance, discovered that its new carrier’s policy didn’t cover a nearby children’s play area despite it being part of the property under their previous policy, creating serious exposure.

Inaccurate classifications can completely alter your premium and protection as well. For example, a trampoline park that had been originally classified as a health spa by one carrier saw its rate skyrocket from $600 to $25,000 annually when a new carrier correctly classified its risk. Had a liability claim been made during the time it was classified as a health spa, the trampoline park could have been left without adequate coverage.

3. Intro Rates Don't Usually Last 

Some carriers offer an attention-grabbing price to win new business, but it doesn’t usually last.

It’s a typical pattern: A carrier underprices a policy to be competitive, especially in industries with rising premiums. After the first term, the rate adjusts to reflect the reality of current industry pricing. For small businesses, such unpredictability can wreak havoc on budgets and planning.

In contrast, carriers with long-term relationships tend to reward loyalty with more stable pricing. They’ve seen your operations over time, understand your claims history, and are more likely to apply moderate price increases over time than surprise hikes. While no one can guarantee premiums won’t rise, continuity often comes with fewer shocks.

The Real Value of Staying Put is Risk Management

As real-world examples show, the savings of switching carriers for a lower rate often come with strings attached: gaps in coverage, reclassified risks, hidden exclusions, or second-year price hikes. What’s harder to quantify, but just as important, is what you lose when you leave behind a carrier who knows your business.

Long-term relationships with carriers don’t just reduce friction during renewals. They create opportunities for stronger risk management all year long. Over time, those carriers gain a deeper understanding of your operations, claims patterns, and exposures. Some even complete walk-throughs of your premises. They can right-size your risk and flag fixable issues before they escalate and become a claim. That’s guidance rooted in experience, not guesswork.

Talk to Your Broker Before You Make a Move

Switching carriers might make sense in certain situations. But it should never be a reflex.

Before you make a move, have a conversation with your broker. They can walk you through the tradeoffs, highlight any potential coverage gaps or financial consequences, and make sure you’re not giving up long-term value for short-term savings.

Contact a Risk Advisor today to learn more.