U.S. Commercial Insurance Prices Increase By 4%

Commercial insurance prices keep rising more aggressively in the second quarter of 2019 when compared to prices charged during the same period in 2018, based on the latest survey by Willis Towers Watson’s (NASDAQ: WLTW) Commercial Lines Insurance Pricing Survey (CLIPS). Willis Towers Watson has roots dating to 1828 and they are currently a leading global advisory, broking, and solutions company. Their unique perspective helps them see the critical connection between talent, resources, and ideas – the perfect formula to boost business performance.   

Pricing went up by approximately 4 percent in 2019 with the increase hovering closer to 2 percent more on each of the prior five quarters. Willis Towers Watson links the increase to property, excess/umbrella, and directors and officers (D&O). Commercial auto, for example, saw an increase that doubled digits for the seven successive quarter. While the survey found prices skyrocketing for all accounts, it was predominantly on mid-market and larger accounts.

The survey aligns with comments by Property and Casualty (P-C) executives. AIG President and CEO Brian Duperreault had mentioned last month that he believes the hardening market is acceptable.   Overall, there are rate improvements throughout the global portfolio, so the capacity hasn’t necessarily declined. There are also early signs that market-firming conditions are spreading quickly to other territories around the world, and that’s a good thing.

CLIPS data are based on business figures gathered directly from carriers underwriting the business. CLIPS participants represent a section of U.S. P-C insurers, which include many major commercial lines companies as well as the top 25 United States insurance groups. This specific survey compares prices charged on policies that were written in the 2018 first quarter. The recent survey included 40 participating insurers contributing data, which represents 20% of the U.S. insurance market with the exclusion of state workers compensation funds.

Some specific types of business have seen a greater increase than others, for instance, in excess liabilities for larger accounts. Also, there has been an increase in natural catastrophes around the world for the past few years, which places more pressure on the property market – property pricing increasing by 10%.

Damage from hurricanes and tornadoes should be covered by standard business insurance policies, but some insurers may not want to sell their policies in coastal areas where the damage for a hurricane is greater. Also, coverage for flooding and earthquakes may need separate coverage, and that can be very expensive. Likewise, standard policies are meant to cover real property and will not cover vehicles or cars. Owners will have to buy business auto insurance to ensure that they are reimbursed from disasters, besides their average collision and liability coverage.

With prices for commercial insurance rising, insurance brokers and agents will have to explain a couple of things to their clients – a time-consuming process that requires expertise.  It’s challenging since everyone is trying to secure the best deal possible with the best pricing. Clear-cut communication will be needed, whichever approach is taken. Agents must deal with the news in a strong and concise matter and mitigate whatever concerns their clients may have in the best possible way.

Sources
  • https://www.cms.gov

  • https://www.globenewswire.com

  • https://www.insurancejournal.com

  • https://www.iii.org/article/spotlight-on-catastrophes-insurance-issues

  • https://www.nationwide.com/prepare-your-business-for-a-natural-disaster.jsp

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