When I talk with our agents that serve middle market clients, the same themes consistently emerge: middle market businesses are optimistic, but they’re also fatigued and looking for more than traditional risk transfer from their insurance partners. Many owners are walking a tightrope, balancing persistent cost pressures with the need to continue investing in their people.
That tension shows up in our research as well. Nationwide’s latest survey of business owners shows 75% of middle market leaders feel positive about their current business conditions, even as they grapple with ongoing financial pressures that influence how they manage expenses, staffing and risk.
Workforce strain and investment are rising together
Middle market businesses report a range of financial concerns, led by inflation, high interest rates, tariffs, the potential for an economic downturn and supply chain disruptions.
Despite these pressures, most leaders aren’t turning to layoffs to control costs. In fact, 8 in 10 middle market firms have either hired workers or plan to do so in the next 12 months. Another 17% say they’d cut their own salary before reducing employee benefits that help them attract talent.
Yet, at the same time, many companies are asking more of their existing teams:
- Nearly three-quarters say they’ve increased responsibilities for current staff or plan to soon
- One in four report more mistakes tied to heavier workloads over the past year
With competition for skilled workers remaining high, strong risk management practices that keep employees safe can be a valuable tactic for businesses focused on retaining and optimizing talent.
However, as our team meets with business owners and leaders we are instead hearing that they are cutting or plan on cutting spending in risk management, safety and training – another trend identified in our survey. This is a trade-off that can lead to greater lost time for employees, jobsite vulnerabilities that cause work to be delayed, and lower work quality that could expose a business to greater liability or litigation costs later.
As insurance professionals, businesses are leaning on the data we can provide to help them understand the risks and cost implications of reducing their safety, quality and risk management programs. When we can connect loss drivers to business costs, we can help business owners see the full value and benefit of maintaining or strengthening their programs.
Insurance programs are under review
Economic pressure is also prompting many businesses to re-evaluate their insurance policies, and many middle market owners are exploring strategies to manage premium costs – including renegotiating policies, increasing deductibles or reducing coverages and limits.
For example, we’ve seen midsize manufacturing clients opt to postpone equipment coverage renewals to save cash – a move that could magnify losses after a breakdown.
Agents themselves are seeing this trend play out across their client base in the past 12 months: one-third report clients delaying the purchase of insurance policies or canceling optional coverages.
Some middle market businesses are also exploring alternative risk structures. In the past year:
- 29% report adopting some degree of self-insurance
- 21% have shifted a coverage to parametric insurance
While these approaches can offer greater control of costs for the customer, they also require a clear understanding of the risks being retained. Increasing deductibles, reducing coverage limits or shifting risk into alternative structures can create unintended exposure if decisions are made without careful planning.
Efficiency investments are accelerating
Not every response to economic pressure involves cost cutting. Many middle market companies are also investing in technology and improvements designed to streamline operations.
More than three quarters are currently investing in AI tools to help improve productivity, and 9 out of 10 report positive returns.
These investments can help organizations manage staffing pressures and operate more efficiently. But they can also introduce new exposures.
For example, a regional retail chain recently rolled out an AI‑based inventory tool to automate restocking and reduce manual counts. The system improved efficiency almost immediately, but it also introduces a cyber risk should the system be tampered with by a bad actor – which would prevent accurate stock visibility and possibly lead to lost income.
As technology continues to become central to business’ daily operations, agents and brokers must stay close to understand how these changes reshape risk needs, coverages and limits.
A critical moment for guidance
Our research and conversations point to a business environment where middle market companies are balancing cost pressures with operational resilience. For agents and brokers, that creates an opportunity to provide more proactive guidance as clients navigate these decisions.
Here are some key conversations to prioritize with middle market clients:
- Coverage trade-offs. As businesses look to renegotiate policies, increase deductibles or cut certain coverages, insurance professionals can help businesses understand the long-term implications and avoid unintended coverage gaps.
- Workforce-related risk. Increased workloads, staffing changes and shifts in training or safety investments can cause unintended risks to worker safety which in turn can cause labor shortages, operational risks and increased liability exposure.
- Technology-driven exposures. As companies adopt AI and other digital tools to improve productivity, agents and brokers can help ensure liability, cyber and professional liability exposures are properly addressed.
- Risk financing strategy. For some middle market companies, alternative structures including self-insurance, parametric coverage or other risk retention approaches may become part of the conversation as they seek more control over costs.
Economic uncertainty is likely to remain a feature of the business landscape but the next year won’t be defined by cost pressure alone. It will be defined by how well agents and brokers help clients navigate the trade-offs those pressures create.
