The market continued to harden into the third quarter of 2020, according to results from The Council of Insurance Agents and Brokers quarterly Commercial Property/Casualty Market Index. The CIAB announced the survey results in a news release in November.
Respondents to the survey reported moderate to significant increases for all account sizes and all commercial lines, including workers’ compensation. The average increase in premium pricing for all sized accounts again broke double digits in the third quarter of 2020 at 11.7 percent, compared to the previous quarter when prices increased 10.8 percent. The third quarter was the 12th consecutive quarter of premium increases.
When segmenting responses by account size, large accounts saw the largest average increases in premium pricing, at 15.3 percent, compared to 14.2 percent in the second quarter and 12.6 percent in the first quarter.
Medium accounts experienced notable increases, with an average increase of 12.7 percent, compared to 11.0 percent in the second quarter and 9.8 percent in the first quarter.
On the other hand, small accounts seem to have been more insulated, with an average premium increase of 7.1 percent.
Umbrella had the highest average price increase, at 22.9 percent, up from 20 percent in the second quarter of 2020. Directors and officers also recorded a significant average price increase of 16.1 percent, followed by commercial property with an increase of 14.2 percent. Prices also continued to increase for workers’ compensation, with an average increase of 1.5 percent, signifying that the 21-quarter streak of price decreases for that line has come to an end.
“It’s clear the pandemic has accelerated the market conditions observed in previous quarters,” said Ken A. Crerar, president/CEO of The Council. “The financial stress from the extended economic contraction has contributed to increased premium pricing across the board, heightened insurer wariness and reluctance to take on additional risk. It’s critical for brokers to act as trusted advisors for their clients and help them through this troubled time.”
In terms of underwriting, 90 percent of respondents reported carrier capacity for umbrella risk decreased in 2020’s third quarter, demonstrating a significant crisis in capacity for the line. Nearly 80 percent of respondents also said that capacity for commercial property was cut substantially in the third quarter of 2020, with respondents citing an already severe natural catastrophe season, characterized by out of control wildfires in California, a tornado outbreak in the Southeast, the August derecho in the Midwest and major hurricanes.
In general the reduction in capacity observed in the third quarter was coupled with increased deductibles, reduced limits and more scrutiny from carriers. Respondents described significant loss control requirements in the third quarter and reported that carriers were asking for detailed financials/business income statements from the insureds. Many respondents also reported additional communicable disease exclusions and increased scrutiny about COVID-19 preparedness.
Aside from driving organic growth and recruiting and developing talent, which have topped the list of respondents’ top three priorities and challenges for years, maintaining employee health and wellness was also a top-three challenge.
“COVID-19, the election, and so on … insurance folks are working harder than ever during the pandemic and trying to keep it together. It’s hard for everyone right now,” said one respondent from a large Northwestern firm. Respondents highlighted the negative effect the extended period of working from home was having on their employees’ mental health as well as on company culture.
Most respondents acknowledged that maintaining employee health and wellness is of the utmost importance, because it will help the organization weather the ongoing pandemic and contribute to driving organic growth and recruiting and developing talent during this period. According to one respondent, “Our people are our number one asset. We invest in our people with the best benefits, support and mentoring we can muster so that the best stay and can then act as word of mouth recruiters.”
