Middle-market firms are bargain-hunting their way into disaster. In the race to cut costs, many are opting for cheap coverage over real protection, leaving themselves exposed to catastrophic losses in a hardened market.
Premiums are spiking, coverage is shrinking, and carriers are retreating from entire regions. Middle-market firms that once relied on minimal, transactional policies are hitting a wall: those strategies no longer hold up against today’s complex risks.
“For years, the middle market has been overwhelmed and under-resourced,” said Jeff Jones, a managing director at Insurance Office of America.
“Now, with tariffs and supply chain disruptions, they’re no longer focused on what matters most - keeping customers happy, attracting new clients, and retaining employees. Risk management just isn’t prioritized.”
That lack of focus is creating dangerous blind spots. Companies treating insurance as a routine renewal task are more vulnerable than they realize, until it’s too late.
Jones, alongside colleague Aaron Cohen (pictured), says many business owners still believe cheaper coverage is better coverage, only to discover the limits when a claim hits.
One of the most persistent misconceptions Jones and Cohen encounter is the belief that cheaper coverage is better coverage. That mindset is proving costly as exclusions widen and policy terms tighten.
“Shopping aggressively for the cheapest policy is not risk management,” Cohen said. “When you don’t understand the risks you're truly covered for, you’re playing a losing game.”
Many business owners assume their general liability or umbrella policy covers all major risks, only to find out, post-incident, that exclusions apply.
“If someone dies on your property and you didn’t notice an assault and battery exclusion, you’re out of luck,” Cohen said. “That’s the difference between staying afloat and going under.”
Many middle-market firms still carry outdated coverage limits, an increasingly risky move as nuclear verdicts turn even moderate claims into multimillion-dollar losses. Jones warns most haven’t adapted to this new reality.
“Even small and mid-sized firms need to be thinking about higher liability limits,” he said. “It doesn’t take a catastrophic event anymore to trigger catastrophic losses.”
At the same time, the reflex to maintain low deductibles is inflating premiums without improving protection.
“If you’re paying for every claim under $100,000, that’s just a bad investment,” Jones said. “You’re better off self-insuring those smaller losses and using insurance for what it’s meant to cover – major, unplanned disruptions.”
With traditional coverage becoming more expensive and less reliable, Jones said well-capitalized businesses should consider alternative risk transfer options, such as group captives, high-retention programs, or even forming their own captive insurance company.
“For companies with low losses and strong financials, it’s a no-brainer,” he said. “But it’s not for everyone. You need to understand what you’re committing to, it’s a long-term play, not a quick fix.”
Still, the economics are hard to ignore. Cohen said that insurers are increasingly uninterested in covering “nickel-and-dime” claims. “It’s not profitable for them,” he said. “It’s time for businesses to take on that responsibility themselves, because they’ll save more doing so.”
Another pressure point is the mass migration from admitted markets to excess and surplus (E&S) lines. These non-admitted carriers provide needed capacity, but with less regulatory oversight and far leaner coverage terms.
“More and more business is moving into the E&S market,” Jones said. “It might be the only place left to go, but the trade-offs are real. Especially in regions like Southern California, where admitted carriers are exiting property entirely, we’re seeing businesses left with limited options, and limited protection.”
For brokers, this moment demands a complete rethinking of their role. Gone are the days of acting as middlemen for policy quotes. Today’s brokers must act as risk consultants, helping clients assess exposures across the business, not just the balance sheet.
“Brokers need to be strategic partners, not just insurance vendors,” Jones said. “We have to help clients evaluate new locations, assess risk in acquisitions, and integrate insurance into continuity planning. That’s how we create value beyond the policy.”
Too often, those broader conversations never happen. Cohen pointed to a widespread lack of disaster preparedness.
“What happens if your manufacturing facility burns down? What if ransomware shuts down your order system?” he said. “These aren’t remote hypotheticals. They’re weekly headlines, and too many businesses don’t have a plan.”
Jones agreed that risk management can no longer be treated as a siloed function. It must be embedded in leadership conversations and business strategy.
“Companies that can integrate risk management into their broader strategy will be better positioned to navigate this volatility,” he said. “Those that don’t will fall further behind.”
