6 Drivers Behind the Rising Cost of Equipment Breakdown Insurance

Travelers red umbrella
By Travelers
1 minute
A man in safety equipment analyzing a machine for possible breakdown.

The changing risk landscape and the impact of inflation are contributing to the rising costs of equipment breakdown coverage. Below are several factors to consider.

1. Supply Chain Disruption

Grey icon of dollar sign.  

Equipment repair and replacement costs are increasing due to the rising cost of goods and longer delivery times resulting from supply shortages. With equipment and parts harder to come by, increased equipment downtime can lead to shutdowns or higher interim equipment rental costs. As a result, Business Income and Extra Expense coverage claims can also increase, another contributor to the rising cost of insurance.

2. Skilled Labor Shortage

Grey icon with man in hard hat.  

Technological advances have increased the complexity of machinery and equipment design, which often means that more specialized technicians are required to diagnose and make repairs. Additionally, since 2020, the average number of maintenance recommendations has increased 56%.1 Fewer skilled workers and increased employee turnover can lead to higher equipment breakdown loss costs down the road.2

3. Aging Infrastructure

Grey icon with connector arrow and right angle.  

As the public and private electrical infrastructure in the United States continues to age, there will be increased exposures to breakdowns. For example, aging electrical equipment can become less reliable due to degradation of insulation over time. This can lead to additional electrical line disturbances with the potential to damage large and small electrical components. In many cases, repairs to older infrastructure components are no longer permitted by modern code requirements or are otherwise not technically feasible.

4. Underinsured

Grey icon of three buildings.  

While recent inflation has driven up the costs of materials and services, only 43% of business owners say they have increased their policy limits to accurately reflect what it would take to replace insured property now.3 Customers must have accurate valuations for their assets so they don’t come up short after a loss, and premiums will reflect those higher values.

5. Catastrophe Losses

Grey icon with cloud and lightening bolts.  

Increased frequency and severity of extreme weather events continues to drive catastrophe losses higher. Loss or damage caused by severe thunderstorms, tornadoes, hail, floods, wildfires, hurricanes and winter storms can greatly affect electrical reliability and increase the frequency of equipment breakdown claims. Over the past five years, natural catastrophe losses have averaged about $100 billion globally.4 In 2022, total insured losses globally were estimated at a staggering $140 billion.5

6. Reinsurance

Grey icon RE with two circular arrows.  

Catastrophic events are a major factor driving up the cost of reinsurance – an expense primary carriers need to pass along to customers. At the same time, inflation and the economic environment have been making reinsurers more selective.6 In early 2023, the gap between reinsurance supply and demand was estimated at $60 billion, three times what it was the previous fall.7 Equipment breakdown, included in certain property reinsurance programs, follows the same trend, leading to higher costs for both treaty and facultative reinsurance.

Contact your Travelers representative today.


1 Travelers Risk Control Data: Boiler & Machinery Inspections, 1/1/2014 – 3/15/2020 vs. 7/1/2021 – 12/31/2022. 

2 Workforce Survey Analysis, 2021. Associated General Contractors of America (AGC)

3 Selective Insurance Group, Inc. (2022, May 10). Selective Insurance Study Finds Less Than Half of Business Owners Have Increased Insurance Limits to Account for Inflation. The Harris Poll.

4 Moody’s Investors Service. (2023, January 10). Reinsurers defend against rising tide of natural catastrophe losses, for now. Moody’s.

5 Gallin, L. (2023, Jan. 30). Global insured losses from natural catastrophes in 2022 seen at $140bn by Gallagher Re. Reinsurance News.

6 Monaghan, J. (2023, January). Reinsurance Market Dynamics. Aon.

7 Evans, S. (2002, Dec. 29). Renewals: Some elevated appetites seen, but property cat gap writ large Artemis.

Closeup of two hands on car steering wheel driving safely down a road.

Up Next

5 Forces Driving Commercial Auto Insurance Costs

What's driving the increase in commercial auto insurance rates? Explore five factors that have significantly impacted the rates for commercial auto.

Related Products & Services

With more than 100 years of experience in the equipment breakdown business, Travelers has set the industry standard for broad and progressive protection and services.

More Prepare & Prevent

The Impact of Emerging Technology on Equipment

Learn how emerging technology is impacting equipment breakdown and five ways companies can prepare to be more resilient.

High-tech manufacturing equipment.

More Prepare & Prevent

4 Risks of IoT in Manufacturing

While IoT can be a competitive advantage for manufacturers, it can also introduce new operational risks. Here are four key risk scenarios to consider when introducing IoT into manufacturing processes, procedures and finished products.

Person using tablet to control IoT manufacturing equipment.

More Prepare & Prevent

Commercial Boiler Maintenance

Proper commercial boiler maintenance can help protect your business against heating-related accidents.

Commercial boiler.
Men meeting in a warehouse.

Find Solutions

Discover products by industry:

Business person smiling and carrying a red folder.

Find an insurance agent

Get coverage for your unique professional risks.