The insurance market as a whole continued to harden in Q4 2019 according to the Council of Insurance Agents & Brokers (CIAB) Property & Casualty Market Survey. Rising premiums and stricter underwriting continue to be a story with a 7.5% average premium increases across all accounts, an uptick in a two-year pricing trend. Smaller accounts saw more modest, 5.2%, increases.
“Q4 was a difficult quarter for insurers, brokers and clients alike,” said Ken Crerar, President of CIAB. “The increased frequency and severity of Commercial Auto, Umbrella and D&O claims were linked with higher premiums and significant tightening in underwriting.”
Commercial Auto & Umbrella
Commercial Auto premiums continue to soar for insurance buyers, increasing for the 34th consecutive quarter. On average, auto premiums increased by 10.5%, also the greatest increase since 2003. Distracted driving and an increase in claims costs remain as the main factors behind the continued climb.
Rising premiums have become a major trend for Umbrella coverage, with an increase of 13.6% in Q4 2019. This is a turnaround from just two years ago when Umbrella rates were flat and falling. Some brokers have reported Umbrella in a “state of crisis” as carriers look to reduce exposure to underlying auto and the market responds to a recent string of “mega-verdicts.”
Directors & Officers
Outside of major lines, D&O also saw one of its biggest premium increases in recent quarters at 7.0%. “There are a multitude of reasons for premium increases,” said John Milano, RCM&D’s Corporate Liability Practice Leader. “Social inflation, event-driven litigation, class action lawsuits and the rise of litigation financing are just a few examples factoring into premium increases.”
Construction Risks also saw a sizable premium increase at 6.3%. The more significant t increases occurred in the Auto line, particularly contractors with heavy units and also in the Umbrella line where increases are well above 10-15% on average. Umbrella underwriters are also reducing limits and increasing premium costs per million.
Additionally, the Builders Risk market is firming quickly for Construction risks. Clients are seeing increasing rates & deductibles as well as tightening of terms and conditions. Insurers have seen major upticks in water damage claims and increases for Builders risks are in the +10% range.
For the first time since the Council began monitoring Cyber premiums, the market may be signaling a transitional period, with increases of 3.0% on average. Ransomware and other high-dollar cyber-related losses continue to plague policyholders.
“While many clients have still experienced favorable renewals, these trends are likely indicators of a shifting cyber market,” said Scott Martin, RCM&D Cyber Practice Leader. “As more carriers begin to experience increased claims activity the cyber rate slashing from the late 2010s is over. In addition to monitoring the ever-changing cyber risk landscape, businesses will need to watch the cyber insurance market as appetite and flexibility could change.”
Looking forward, the spread of Coronavirus coupled with political uncertainty at home and abroad makes the extent of business, supply chain and workplace interruption, not to mention the tragic human toll, uncertain. RCM&D will continue to monitor the situation and advise clients when insurance may be a tool to help navigate the unfolding situation.
You can download RCM&D’s one-page snapshot of the Q4 for 2019 results. The snapshot includes our key market observations as well as one-year trend analysis for many coverage lines, including Commercial Auto, Commercial Property, Workers’ Compensation, General Liability, Employment Practices Liability and more.
Download the One-Page Snapshot It is important to note, the report represents overall trends for the commercial property and casualty premiums. These trends may differ within a specific industry, region or sector.
If you have any questions about this report or would like to discuss how market trends may impact your insurance program, please contact your client service representative for more information or you may contact a trusted RCM&D advisor today.
The CIAB is the premier association for the top regional, national and international insurance intermediaries. The Council’s market survey, released quarterly, tracks trends in the US commercial insurance markets based on data and insights from member firms. RCM&D is a member of the CIAB.