At the close of the third quarter 2020, commercial lines and personal lines property/casualty insurance buyers saw rates increase on every line of coverage.
For commercial lines, “the composite rate is up 6.5 percent for the third quarter 2020 as compared to up 4.8 percent in the second quarter,” said Richard Kerr, CEO and founder of Dallas-based MarketScout. “Rates began adjusting upward at a quicker pace in September. We expect the fourth quarter 2020 will reflect continued aggressive rate increases in property, D&O and umbrella/excess liability coverages.”
D&O rates were up the most at 11.5 percent, followed by umbrella and excess liability, which registered an increase of 8.5 percent. For the first time in over five years, workers’ compensation rates were up, albeit only 0.5 percent, but they were up.
Commercial auto rates increased by 8.0 percent in the third quarter, while professional liability increased by 7.5 percent, and commercial property rates were up 7.0 percent.
Rates for all other lines of business were up, but showed smaller increases, according to MarketScout. Rates for EPLI were up 6.5 percent; business interruption and general liability rates were up 5.5 percent; BOP and inland marine rates were up 5.0 percent; crime, up 3.5 percent; fiduciary, up 3.0 percent, and surety, up 0.5 percent.
By industry class, transportation and habitational rates increased the most, with average rate increases in the quarter at 10.5 percent and 8.0 percent, respectively. Public entity rates were up 6.5 percent, while contracting rates were up 6.0 percent, followed by the service industry with rates up 5.0 percent, and energy and manufacturing with rates increasing 4.5 percent.
Large accounts, those with $250,001 to $1 million in premium, and medium accounts, from $25,001 to $250,000 in premium, saw the largest rate hikes, moving up 7.0 percent. Small accounts, up to $25,000 in premium, and jumbo accounts, those over $1 million in premium, were up 6.0 percent.
The third quarter 2020 composite for personal lines rates in the U.S. advanced by 5.0 percent.
“The composite rate is measured on millions of insureds across the United States in low risk areas. Conversely, homeowners in California and coastal areas of Florida are suffering massive rate increases,” Kerr said. “If an insured owns a home in high risk wildfire or hurricane areas and has suffered prior losses, rate increases can be as high as 40.0 percent. Many admitted insurers are avoiding taking risk(s) in these areas; thereby, driving insureds to the non-admitted market. Since there is less regulation for non-admitted insurers, they can restrict coverage and charge higher rates.”
Homeowners insurance for homes valued at more than $1 million cost the property owner 5.5 percent more in the third quarter 2020, while homes valued at less than $1 million experienced rate increases of 5.0 percent. Automobile rates were up 5.0 percent in the third quarter 2020, compared to increasing 4.0 percent in the second quarter 2020. Personal articles coverage was more expensive in the third quarter 2020, with rates up 4.5 percent, compared to an increase of 2.7 percent in the second quarter 2020.
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