Resources & Insights

‘Hardening’ of Commercial Insurance Market Persists

March 4, 2020

Business insurance premiums rose once again in the last quarter of 2019, climbing by an average of 7.5%, according to the latest property and casualty survey by the Council of Insurance Agents and Brokers.

Large accounts were hardest hit in the fourth quarter, with an average increase in premiums of 9.4%. Small accounts saw an increase of 5.2%.

It was the ninth consecutive quarter of rate increases, the continuation of a “hardening” of the insurance market spurred by a string of catastrophic hurricanes, among other factors.

“Q4 was a difficult quarter for insurers, brokers and clients alike,” said Ken A. Crerar, president and CEO of the CIAB. “(An) increased frequency and severity of commercial auto, umbrella and directors and officers claims were linked with higher premiums and significant tightening in underwriting. While other lines did not experience such notable shifts, there was evidence of the firming market.”

Commercial auto and umbrella saw average price increases in the fourth quarter of 10.5% and 13.6%, respectively. It was the first double-digit increase in either line since 2003.

Directors and officers insurance, or D&O, also experienced significant rate increases, coming in at 7%. Social inflation – generally defined as a combination of factors including a rising number of securities class-action lawsuits, the growing popularity of litigation financing and a shift in social trends (e.g., the #MeToo movement) — was likely correlated to D&O’s rising cost, according to survey respondents.

The survey also found that carriers’ appetite for certain risks was down. For example, respondents said that some carriers refused to cover standalone commercial auto. Carriers also were expecting higher attachment points of $2 million instead of $1 million for their umbrella policies, the respondents said.

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.

Not surprisingly, “future premium increases” was one of the top concerns 82% of the respondents said they heard from their clients, followed by “limitations on coverage” and “high current premium.”

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 this hardening market environment, underwriters are cautious and inundated with submission flow. Their time will be focused on submissions that have sound risk management controls and quality information. Insureds who don’t provide ample underwriting time and insufficient information will more often see a quick declination from underwriters.

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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