--- title: Fluctuating Interest Rates – Insurance Impact - DSP Insurance Services description: How fluctuating interest rates impact insurance pricing and availability. What businesses should know about rate environments. --- [![DSP Insurance Services](https://blog.dspins.com/hs-fs/hubfs/raw_assets/public/Dsp_November2023/images/DSP-Logo-500.png?width=500&height=382&name=DSP-Logo-500.png "DSP Insurance Services")](https://www.dspins.com/) - [Insurance Solutions](https://www.dspins.com/insurance-solutions/) - [Business Insurance](https://www.dspins.com/business-insurance/) - [Workers’ Compensation](https://www.dspins.com/business-insurance/workers-compensation-insurance/) - [Directors and Officers Liability](https://www.dspins.com/business-insurance/directors-and-officers-liability-insurance/) - [Employment Practice Liability](https://www.dspins.com/business-insurance/employment-practice-liability-insurance/) - [See All](https://www.dspins.com/business-insurance/) - [Employee Benefits](https://www.dspins.com/employee-benefits/) - [Group Health](https://www.dspins.com/employee-benefits/group-health-insurance/) - [Group Dental](https://www.dspins.com/employee-benefits/group-dental-insurance/) - [Group Vision](https://www.dspins.com/employee-benefits/group-vision-insurance/) - [See All](https://www.dspins.com/employee-benefits/) - [Insurance by Industry](https://www.dspins.com/business-insurance/insurance-by-industry/) - [Contractor](https://www.dspins.com/business-insurance/insurance-by-industry/contractor-insurance/) - [Manufacturer](https://www.dspins.com/business-insurance/insurance-by-industry/manufacturer-insurance/) - [Financial Institution](https://www.dspins.com/business-insurance/insurance-by-industry/financial-institution-insurance/) - [See All](https://www.dspins.com/business-insurance/insurance-by-industry/) - [Personal Insurance](https://www.dspins.com/personal-insurance/) - [Home](https://www.dspins.com/personal-insurance/home-insurance/) - [Auto](https://www.dspins.com/personal-insurance/auto-insurance/) - [Umbrella](https://www.dspins.com/personal-insurance/umbrella-insurance/) - [See All](https://www.dspins.com/personal-insurance/) - [Safety Consulting](https://www.dspins.com/safety-consulting/) - [Service Center](https://www.dspins.com/service-center/) - [Explore Policy Options](https://www.dspins.com/service-center/) - [Report a Claim](https://www.dspins.com/service-center/report-a-claim/) - [Request Auto ID Card](https://www.dspins.com/service-center/request-auto-id-card/) - [Request a Certificate](https://www.dspins.com/service-center/request-certificate/) - [Request a Bond](https://www.dspins.com/service-center/report-a-claim/) - [Policy Review](https://www.dspins.com/service-center/policy-review/) - [Request Policy Change](https://www.dspins.com/service-center/request-policy-change/) - [Client Login](https://www.dspins.com/service-center/#client-login) - [Custom Insurance Benchmarking](https://www.dspins.com/custom-insurance-benchmarking/) - [About](https://www.dspins.com/service-center/) - [About Our Agency](https://blog.dspins.com/About%20Our%20Agency) - [Agency News](https://www.dspins.com/blog/category/agency-news/) - [Meet Our Team](https://www.dspins.com/about-our-agency/meet-our-team/) - [Read Our Reviews](https://www.dspins.com/about-our-agency/read-our-reviews/) - [We Are Independent](https://www.dspins.com/about-our-agency/we-are-independent/) - [Community Involvement](https://www.dspins.com/about-our-agency/community-involvement/) - [Join Our Team](https://www.dspins.com/about-our-agency/join-our-team/) - [Learn About Our Agency](https://www.dspins.com/about-our-agency/) - Media - [Blog](https://blog.dspins.com/) - [Podcast](https://www.dspins.com/podcast/) - [Events](https://info.dspins.com/events) - [Contact](https://www.dspins.com/contact/) - [Schaumburg, IL Office](https://www.dspins.com/contact/schaumburg-il-insurance/) - [1900 E. 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Golf Road Suite 650 Schaumburg, IL 60173](https://www.dspins.com/contact/schaumburg-il-insurance/) - [847-934-6100](tel:847-934-6100) - [info@dspins.com](https://blog.dspins.com/info@dspins.com) - [Review Us](https://www.dspins.com/contact/review-us/) - [Refer Us](https://www.dspins.com/contact/refer-us/) - [Contact](https://www.dspins.com/contact/) - [847-934-6100](tel:847-934-6100) - [Request Quote](https://www.dspins.com/request-quote/) - - [DSP Insurance Services](https://blog.dspins.com/author/dsp-insurance-services) [Business Insurance](https://blog.dspins.com/tag/business-insurance) 1 Minutes ## Fluctuating Interest Rates – Insurance Impact In late October 2019, the Federal Reserve [announced](https://www.reuters.com/article/us-usa-fed/u-s-fed-cuts-interest-rates-and-signals-it-is-on-hold-idUSKBN1X90D7) they would lower the Federal Funds Interest Rate by a quarter of a percent.  This was the third such decrease of the year. What impact does this have on the commercial property & casualty insurance market and the annual premium paid by a business?  In general, when interest rate falls, insurance premiums tend to rise.  The rationale behind this is tied into the two ways that commercial insurance companies typically generate revenue; Underwriting Operations and Investment Activities. Underwriting operations account for most of the revenue of an insurance company, Simply put, it is collecting enough premium dollars to pay for claims and operating expenses, with enough left over for a reasonable profit.  To supplement the underwriting activities, insurance companies will invest that premium to attempt to earn additional revenue. When premium is paid by a business to a commercial insurance company, there is usually significant lag-time between premium collection and payment of a claim (weeks, months or sometimes even years for some liability and property claims).  Insurance carriers take advantage of this lag-time by investing those premium dollars. Consequently, when interest rates are low, insurance companies expect lower investment profits.  With these lowered expectations, the underwriting department feels more pressure to operate profitably, and thus the trend for premiums to rise.  For an in-depth analysis of your current insurance program, contact us [here](https://dspins.com/contact/).  *\*Please note that while there are many factors that go into premium determination and pricing models developed by insurance companies, the above is the commonly accepted principle regarding the impact of interest rates on the insurance market.*   --- #### Tag: [Business Insurance](https://blog.dspins.com/tag/business-insurance) #### Share: - [Follow us on Linkedin](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.dspins.com/fluctuating-interest-rates-insurance-impact) - [Follow us on Mail](mailto:?subject=Fluctuating%20Interest%20Rates%20–%20Insurance%20Impact%20&%20body=https://blog.dspins.com/fluctuating-interest-rates-insurance-impact) - Follow us on Copy Copied to clipboard --- --- ## Related Posts It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. 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