There is no question that 2020 is a year for the history books. Our nation has experienced life-changing events from wildfires, to hurricanes, to COVID … and soon, a presidential election like no other! While the insurance marketplace as a whole is not hardening, certain types of coverage are volatile, transitioning, hardening — or all of the above.
The events of this year have compounded underwriting conditions, some of which were not just brewing, but coming to a boil. Commercial automobile loss experience has been trending poorly for several years. Insurance carriers continue to impose rate increases, regardless of whether an insured has a solid loss ratio or not. Insureds with an adverse loss ratio are seeing strong double-digit increases, with some facing non-renewal.
However, a positive development arising out of stay-at-home orders is that less traffic has led to a significant reduction in accidents, deliveries being made on time or ahead of schedule and settlements on claims happening quicker than ever. At the same time, the amount of money needed to settle those claims is trending downward. These trends will need to continue in order to help improve auto results which have been unprofitable for many years.
Property insurance has seen an increase in rate, combined with capacity limitations. Carriers are also scrutinizing building valuations and, at times, are increasing building limits to meet a minimum value per square foot. In addition, deductible structures are being evaluated and adjusted as a strategy to improve profitability and exposures being added or deleted mid-term are being met with a more stringent underwriting process.
Perhaps the hardest-hit coverage is umbrella and excess liability. Firmer underwriting guidelines began in 2019 and have continued with intense momentum thus far this year. Countrywide, the marketplace is experiencing greater capacity restrictions, higher rates and significant challenges around program structure. Although all business owners are being impacted, those with larger vehicle fleets are experiencing the largest rate increases.
Tighter underwriting has come largely due to nuclear jury awards that have hit umbrella and excess coverage like never before. Today’s juries generally perceive big corporations to be unethical, resulting in a tendency to side with those they perceive as “the little guy.” It is no longer unusual for a jury award to reach more than $10 million, or even to go into the billions, with jurors often seeking to double the award amount.
The umbrella and excess marketplace is rapidly moving into a hard market whereby rate is increasing significantly while limit capacity is diminishing.
Your BCH service team will continue to work diligently to keep you well informed regarding how these developing market conditions may affect your insurance program. For more information, please contact a member of your BCH service team.