By Erin Ayers, Advisen
A hard market is now in full swing for the property-casualty commercial insurance market, with average price increases across all account sizes and lines of business coming in at 9.6% during the first quarter of 2020, according to The Council of Insurance Agents & Brokers (CIAB).
Large accounts tended to experience higher premium increases, with an average of 12.6%, CIAB reported, compared to medium accounts at 9.8% and small accounts at 5.5%.
“We are now in the midst of a hard market, premium increased steadily for 10 consecutive quarters,” said Ken A. Crerar, CIAB president and CEO, in the survey. “Umbrella, commercial property and commercial auto were the hardest hit, with umbrella and commercial property seeing double digit increases—the largest since 9/11. Additionally, the uncertainty around COVID-19 put additional strain on the industry in the latter-half of March. Respondents noted the current pandemic affected carriers’ ability to collect premium and the availability of coverage by the end of Q1.”
Umbrella pricing rose dramatically this quarter, according to brokers, up an average of 17.3%. CIAB also reported that umbrella limits were “cut in half or reduced even further,” as insurers required higher attachment points for umbrella policies with underlying auto or general liability risks.
Brokers said insurers justified umbrella price hikes by citing commercial auto losses, necessary market corrections, and social inflation.
“Social inflation is their favorite word,” one respondent said. Another pointed out that umbrella coverage has been “historically underpriced” with premiums not adequately meeting the exposure.
Apart from workers compensation, all lines experienced average rate increases, CIAB found. Commercial property accounts showed average premium increases of 12%, followed by commercial auto at 9.6% (down slightly from last quarter’s 10.5%) and directors and officers liability (D&O) at 8.9%.
Despite the slight drop in average increases for commercial auto, brokers found underwriters being much tougher and demanding to see risk management changes on accounts.
“Significant skepticism exists when underwriters are told ‘the loss control program will be implemented soon’. They want to see it in action now,” said one broker in the survey.
While cyber insurance is on the lower end of average increases, the 4.4% average change noted in the first quarter is a “record high,” according to CIAB.
Respondents to CIAB’s quarterly survey “had a lot to say” about the COVID-19 pandemic, despite it being too early to discern the ultimate effects on the market. One clear impact could be seen in a jump in demand for business interruption coverage, which rose from 18% of respondents seeing demand in the fourth quarter of 2019 to 47% in the first quarter of 2020. The number of business interruption claims rose from 18% to 75%, although CIAB noted that the increase in the number of claims does not mean the claims were accepted by insurers.
Brokers predicted that COVID-19 will hit their organic growth chances for the future and expressed concern about adjusting to remote work.
“Folks will have to learn to sell remotely to be successful—we will need to learn how to do this,” said one respondent, while others said the pandemic has pushed them to be even more of an adviser to their clients.
“COVID-19 has made it abundantly clear that clients will look to their insurance broker (really a business partner) for consulting advice, well beyond insurance,” one broker said, while another commented, “Insurance continues to get more confusing and difficult. Coverages and contracts keep changing. Clients continue to rely on brokers to counsel them and guide them through the changes.”