Resources & Insights

COVID-19 Puts Pressure on Commercial Insurance Rates

August 26, 2020

The COVID-19 pandemic left its mark on commercial insurance premiums in the second quarter, contributing to rates that, on average, rose 10.8%, according to the latest survey by the Council of Insurance Agents and Brokers.

Increases in Umbrella and Directors and Officers policies saw the highest increases, rising 20% and 16.8%, respectively, the CIAB said.

It was the first time an increase of 20% or higher has been recorded for any of the commercial lines since the 9/11 terror attacks.

Commercial Property rates saw an average increase of 13.3% while Commercial Auto rose at an average of 9.6%. A pricing increase for Worker’s Compensation was recorded for the first time in 21 quarters, at 0.7%.

Just how much of the increase in commercial insurance rates was directly related to COVID-19 was hard to gauge. But the pandemic has seen insurance carriers become more selective in issuing policies. As part of their underwriting nowadays, carriers increasingly are posing COVID-19 related questions as well as adding exclusions for losses from the virus and other infectious diseases.

The CIAB said 70% of the respondents to its survey reported seeing a “decrease in capacity,” or appetite, among carriers for Umbrella, D&O, and Commercial Property policies.

Premiums and deductibles have been rising since late 2018, driven by multi-million-dollar jury awards, catastrophic hurricanes and other factors.

Related: CCIG examines eight major coverage lines, the trends influencing rates and what we anticipate in terms of price changes in 2020. Click here for our report.

Companies facing premium increases can consider a number of measures to help offset spikes in pricing. These include alternative risk transfer solutions such as retention programs that better reflect their risk tolerance. Another option lies in joining a captive, which, in its simplest form, is an insurance company owned by the member-companies that join the captive. In addition, companies that give underwriters ample time to review their paperwork before renewal also can potentially save money.

In short, a proactive approach can help companies earn dividends at renewal and over the long term.

CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

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