2020 has been a year full of the unexpected, especially when you look at the current insurance market. Insurance firms are learning to adapt in a constantly changing time. The insurance industry remains resilient in what is currently a tumultuous economy. We want to give you an updated current insurance market overview to inform you of what is currently going on.
Q: What are you seeing in the current property & casualty insurance market both from a pricing and a coverage perspective?
A: Current insurance market tone:
- Higher rates across most major lines of insurance
- Decreased capacity
- More conservative risk selection
- Longer renewal process – WFH and increased marketing activity
Source: Council of Independent Agents & Brokers Q1 2020 Report – May 26, 2020
A. We are now in the midst of a hard insurance market, with premiums increasing steadily for 10 consecutive quarters. The hardening P&C market was a worldwide phenomenon, with increases in all major geographic regions.
B. Umbrella, Commercial Property, and Commercial Auto were the hardest hit lines, with Umbrella and Commercial Property seeing double-digit premium increases—the largest since 9/11.
C. The uncertainty around COVID-19 put additional strain on the industry in the latter half of March.
Pricing increases were observed across all commercial lines, with the usual exception of Workers’ Compensation. Moreover, the average premium increases across all major lines of business monitored were 8.7%, compared to 7.6% in Q4 2019 and 5.9% in Q3 2019.
In past surveys, Commercial Auto held the dubious honor of having the highest quarterly average premium increase. In Q1 2020 it was outpaced by Commercial Property and Umbrella. While Commercial Auto recorded a premium increase of 9.6% this quarter, Commercial Property and Umbrella recorded increases of 12.0% and 17.3%, respectively.
Apart from Umbrella, Commercial Property was the only line of business to have an average premium increase in double digits, at 12.0%, compared to 9.7% in Q4 2019. This was the 11th consecutive quarter of increased premium for Commercial Property.
Natural Catastrophe Perils
Concern over natural catastrophe perils played a role in how insurance carriers changed their pricing and procedures in the current insurance market. As a result, current insurance market conditions are producing higher deductibles as well as decreased capacity.
2019 was the fourth consecutive year of higher than normal tropical storm activity in the Atlantic. Furthermore, of the storms that formed during the season, two in particular—Imelda and Dorian— caused damage totaling approximately $6.6 billion.
Fires were also a major concern. For example, the Saddle Ridge and Kincade fires in California caused major losses. In addition to that, Alaska’s loss of more than 2.5 million acres of land to wildfire during the 2019 fire season also resulted in losses in excess of $4.5 billion.
Tornado outbreaks resulted in higher claims in 2019 and the beginning of 2020. In October 2019, a large tornado struck the Dallas area, leaving behind an estimated $4 billion in damage and economic loss.
Commercial Auto recorded an average premium increase of 9.6% in Q1 2020, the 35th consecutive quarter of increased premium pricing. Underwriters were tougher on Commercial Auto in Q1 2020 and pushed for pricing increases, especially when the account involved a large fleet.
In addition to that, tighter underwriting guidelines, including carriers requesting Motor Vehicle Records (MVRs) and requirements for fleet management and safety programs, are common with carriers now.
Umbrella premium continued to increase at an accelerated rate in Q1 2020, with an average premium increase of 17.3%. It’s the 10th consecutive quarter of premium increases. The current Excess/Umbrella market is highlighted by decreased capacity offered by underwriters. Carriers have reduced their willingness to put up high limits and programs now must be layered using multiple carriers.
Find a trusted insurance broker
In conclusion, that is the current insurance market overview. In this constantly changing market, it’s important to have a broker you trust that will keep you informed of everything going on. If you would like more information about what we do at Diversified Insurance Group, go here.