Increased financial risk and coverage cuts among ways business owners are trimming costs

For business owners and insurance agents, the economic environment feels particularly unsteady. According to our survey of small commercial and middle market business owners and agents, it’s a complex picture of cost sensitivity, resilience and adaptation. 

While business owners generally have a positive view of their economic position – 59% of small business owners (SBO) and 75% of middle market business owners (MMBO) feel positive about their current business conditions – they are feeling squeezed by persistently higher costs from multiple areas. 

When asked about their business’s finances, their top economic concerns are: 

• Inflation (55% of small business owners and 56% of middle market owners) 

• Tariffs (41% SBO and 46% MMBO) 

• Potential economic downturn (41% SBO and 45% MMBO) 

• High interest rates (39% SBO and 46% MMBO) 

• Supply chain disruptions (32% SBO and 41% MMBO) 

Agency principals reported similar economic concerns and listed the following as their top challenges: 

• 65% reported inflation  

• 63% indicated high interest rates  

• 59% reported increased competition  

In the face of these concerns and higher expenses, businesses of all sizes are looking to optimize operational efficiencies (26% SBOs and 20% MMBOs), implement a new AI tool to save time or money (21% SBOs and 27% MMBOs) or gather advice from a financial advisor (26% of SBOs and 23% of MMBOs). 

Meanwhile, 26% of middle market business owners said they would enhance risk management programs in order to gain peace of mind, and 64% of agents said they recommend risk management/mitigation services as a way to help protect against economic challenges. 

Expense concerns

Tariffs have been an evolving situation throughout most of 2025 and many businesses were concerned about the prospect of raising prices and incurring increased costs. Related to tariffs, our survey found: 

• 39% of small businesses and 44% of middle market business owners are concerned about raising prices for finished goods 

• 38% of SBOs and 51% of MMBOs are concerned about increased costs of raw materials 

• 36% of SBOs and 46% of MMBOs are worried about the impact on profits margins 

• 34% of SBOs and 48% of MMBOs believe the tariffs will present difficulty in being able to maintain pricing flexibility 

To adapt to this situation and protect against tariff policies, middle market business owners have taken actions such as increasing inventory levels (41%), negotiating long-term contracts (37%) and shifting their focus to new markets to offset tariff impact (35%). Similarly, small businesses report negotiating long-term contracts (27%), shifting their focus to new markets to offset tariff impact (24%), and diversifying suppliers from different countries or regions (24%). 

Meanwhile, most businesses are working to protect their customers by eating some or all of the costs associated with tariffs: 

• 69% of middle market businesses are absorbing some or all of the increased costs without passing them on to customers. 

• 58% of small businesses are absorbing some or all of the tariff costs. 

Coverage changes as a way to save

Businesses are looking for ways to become more efficient and trimming expenses wherever they can. Many said they are increasing deductibles or cutting coverages that could leave them open to higher out-of-pocket costs if a loss occurs. Survey results show: 

• A third of SBOs and 38% of MMBOs are renegotiating or seeking competitive bids with their current carrier 

• 32% of SBOs and 36% of MMBOs are increasing deductibles to lower premiums 

• 27% of SBOs and 35% of MMBOs have reduced or eliminated certain optional coverages to reduce expenditures 

Smaller percentages report delaying buying policies (9% SBOs and 15% MMBOs) or said they have canceled policies altogether (9% SBOs and 11% MMBOs). 

Meanwhile, 41% of MMBOs have bundled policies or consolidated coverages with one carrier to help lower costs.  

Middle market businesses are also engaging in some alternative protection pathways to help reduce insurance expenses: 

• 29% have adopted self-insuring employee healthcare 

• 21% have shifted to parametric insurance 

• 22% have formed or joined a captive insurance program 

A smaller portion of small businesses have taken similar action (15% self-insuring health care, 12% utilizing parametric insurance and 12% joining a captive insurance program). 

Agents also report that their clients are looking at their insurance protection as a way to cut costs over the past 12 months: 

• 53% said clients have attempted to renegotiate their coverage or limits 

• 36% have canceled optional coverages 

• 21% have canceled policies altogether 

• 20% have opted to self-insure 

• 19% have purchased parametric insurance 

Investing in workers

Not all areas are necessarily open to cuts however. Survey results showed that business owners are not broadly planning on cutting their workforce. In fact, 29% of small business leaders and 17% of MMBOs said they would cut their own salary before laying off workers.  

Underscoring the importance of workforces, 84% of MMBOs and 59% of SBOs have either hired workers or plan to do so in the next 12 months. This is against 41% of MMBOs and 23% of SBOs who have laid off workers or plan to do so in the next year.  

To help build the effectiveness of their workers and support resilience, 85% of MMBOs and 56% of SBOs are increasing or plan to increase investment in training or upskilling and 83% of MMBOs and 50% of SBOs are increasing investment in safety and risk management programs. 

Seeking conversations

Both small and middle market business owners report wanting to talk to agents about economic impacts. 

More than three-fourths of middle market business owners report being likely to talk to their agent about issues such as rising costs of liability premiums, inflation, high interest rates and employee benefits. Over half of small business owners are also likely to talk to their agents about rising liability premiums, as well as employee benefits, inflation and interest rates. 

During these conversations, 71% of agents said they are primarily checking for discounts their clients qualify for and 64% promote using risk management services. Agents said other actions include: 

• Changing carriers (55%) 

• Increasing deductible (48%) 

• Consider alternative risk structures (47%) 

Most agents (72%) also said that they share risk management resources from carriers to support conversations about economic impacts. Other resources they use with clients include: 

• Newsletter articles about economic conditions (60%) 

• Social media posts (57%) 

• Services to help prevent claims or business disruption (49%) 

• Talking points (48%) 

• Webinars or podcasts about the economy (43%) 

For more information and resources to support your conversations with clients about rising costs and protecting their bottom line, you can visit the following: 

• Client conversation guide on increased costs 

• Weekly Economic Insights by Nationwide podcast 

• Risk Management Solutions Center