A new year is an opportunity for business leaders to reflect on the past 12 months, set new goals and improve their operations.

For agents, it's also a time to evaluate the trends and emerging risks that could affect customers in the year ahead. In 2022, independent agents placed nearly 88% of all commercial lines written premium, according to the Big “I" Market Share Report. That means the next conversation you have with customers could play a critical role in helping them make informed decisions about protecting their business.

Here are three issues and trends most likely to shape 2023, and why they're worth monitoring:

1) Material costs and severe weather harden the property market. Inflation has affected nearly every aspect of running a business, including the buildings and equipment necessary to deliver products and services. As the cost of materials and labor has increased, the cost to repair and rebuild damaged property has followed. And when property is damaged, it's often taking longer to replace due to supply chain constraints.

In recent years, severe weather has compounded these issues and caused widespread damage to several regions. The financial impact to both insurance and reinsurance markets has been significant. Storms have become less predictable, and oftentimes, more frequent. These trends in tandem continue to put greater pressure on both policyholders and insurers.

What does this mean for commercial property clients? Higher replacement costs and less predictable weather events will have a negative impact on property premiums and availability. It will be important to work with customers to help them understand changes to their premium and reassess the value of their buildings and belongings. An updated valuation can help them avoid underinsuring their business' structures and equipment while keeping their company better prepared for the unexpected.

If a customer has business income interruption coverage—or is considering it—help them determine if their coverage accounts for longer recovery timelines. You can also help them maintain a business continuity plan to protect lives and minimize damages to their property in case a catastrophe strikes.

2) Auto accident frequency and severity stress the need for rates and safety. As the economy recovered, traffic congestion worsened in 2022. Unfortunately, unsafe driving behaviors haven't subsided with more drivers on the road, leading to higher accident frequency and severity.

And like the property trends above, it's now more expensive to repair and replace damaged vehicles. Companies also face the increased risk of litigation if one of their drivers is involved in an accident. In addition to social inflation, part of this can be attributed to higher plaintiff attorney involvement, litigation financing, and evolving plaintiff attorney tactics.

What does this mean for commercial auto clients? All of these factors will continue to drive commercial auto and umbrella rates up as insurers try to keep pace with rising claim costs. As an agent, you can help your clients manage some of these costs by exploring potential loss-sensitive options for their business. This allows customers to lower their upfront premium costs while sharing more risk with their insurer.

It also underscores the growing importance—and benefit—of providing in-house safety services to customers. Insurance carriers often have resources to help you develop safety practices for your customers. Insureds who proactively promote and enforce safe driving habits can lower their risks, reduce their claims, and ultimately save on their insurance premium costs.

3) Workers compensation to continue seeing downward pressure. If there's one coverage line that could provide some stability to businesses in 2023, it's workers comp. In 2021, the market remained favorable, finishing at a net combined ratio of 87.2%, according to NCCI.

Many industries saw fewer workplace injuries, while others saw wage inflation affect their payrolls and premiums. In the upcoming year, hiring and employment numbers may slow as the economy cools down, which could affect injury frequency and auditable payroll.

What does this mean for business clients? Customers will benefit from continued rate decreases as the National Council of Compensation Insurance (NCCI) and other rating bureaus recommend pure premium decreases in many states. As economic growth and demand slow down, workers comp audit premiums will likely be lower in 2023 than they were in 2022.

Still, businesses that do continue to hire will need to maintain strong hiring standards and training programs to reduce injury risks. Your agency can help customers by offering risk management resources and helping them incorporate safety fundamentals throughout their workplace.

Every year we see new trends emerge and businesses adapt. As an agent, you can help your customers navigate these changes by starting the conversation now. Help them anticipate what's on the horizon and the steps they can take to protect their business. That quality is why so many companies place their trust in independent agents. Best of luck in the upcoming year.

Michael Teng is the assistant vice president of regional products, pricing and underwriting at Sentry Insurance.