Ask the Expert: Tightening of the Insurance Marketplace
August 14, 2019
What is causing the current tightening of the insurance market?
There are many factors impacting the insurance market. For commercial property, it is predominantly the effect of an uptick in the number of natural disasters, with hurricanes, windstorms, fires and flooding causing catastrophic property loss. This increase is in not only the number of disasters, but also the areas impacted – no longer just devastating coastal regions. For commercial auto, it is the result of long-term underperformance due to more distracted drivers, a surge in the cost per auto claim due to expensive repair parts for vehicles and a rise in large jury awards and settlements. To stay afloat, insurance carriers are adjusting pricing on other lines of coverage to make up for the loss in these areas.
What does it mean when the insurance market is changing?
Generally, a series of catastrophic events or a weak economy may cause insurance costs to rise and, as a result, insurers to tighten their underwriting standards. This is characterized by relatively high premiums, generally fewer options for coverage and reduced willingness of insurance carriers to compete for business, and thus, negotiate terms. For reference, in Q1 2019, premium pricing increased by an average of 3.5%, compared to 2.4% in Q4 2018 and 1.6% in Q3 2018, according to a recent report by The Council of Insurance Agents & Brokers.
Who is impacted?
We are seeing this impact clients in every industry we represent, whether it is Health & Human Services, Manufacturing, Construction or Real Estate. While some industries may be affected more than others, for the first time in several years, we are seeing increases in almost every sector. Of coverage lines, however, commercial auto, commercial property and umbrella/excess liability are experiencing the highest rate increases.
How does Graham work with its clients to help combat this?
It is our job to keep a pulse on the insurance market, so we can ensure we’re thinking three steps ahead for our clients and there are no surprises at renewal. Several months prior to renewal, we provide our clients with an outlook on their renewal pricing and coverage considerations and work with them to develop the best marketing strategy. To combat increased pricing, we show our clients different deductible and retention options that can create significant cost savings. For commercial auto and umbrella coverages, we are proactive in securing higher underlying limits, which can allow for more options with different umbrella carriers as many are requiring higher attachment points.
As the market continues to harden, insurance carriers often treat companies with poor loss history unfavorably. Graham’s Safety Consultants work with our clients to develop strategies and processes that can help prevent losses from happening. In parallel, Graham’s Claims Consultants help minimize the dollars being paid out in losses – impacting our clients’ bottom lines and making their loss history more favorable and attractive to insurance carriers.
Philadelphia, PA, 19102