Insight Into 2020 Insurance Rate Increases

At what point during the year would you like to be advised that the price of your insurance may be going up?...when it's a possibility (6-10 months before renewal), a likelihood (1-6 months prior), or a sure thing (3 to 30 days prior)?

Most of us would like to be advised with enough time throughout the year so we can plan accordingly.  

Price can be a touchy subject for insurance professionals. When we see that rates are going up for a particular line of coverage, we're immediately thinking about who would want to know. Of course, we want to make sure we communicate without alarming anyone unnecessarily (not every client gets a rate increase). But also, so, hopefully, no one is blind-sided by an unexpected premium increase.

Insurance people who base their client relationships on price tend to defer potential "bad news" because they fear their client may decide to shop the insurance elsewhere.

At VANTREO, we look for every opportunity to deliver "good news" to our clients. We know there is an opportunity in every challenge. Even picky insurance underwriters have made exceptions for organizations that run "best in class" operations. We are committed to keeping the lines of communication open. And we support our clients with advocacy, strategy, and tools to help them reach insurance "best in class" status.

With that said, the market for several lines of insurance is hardening (less availability, higher rates, etc.).

Does this mean that your insurance rates will go up at renewal? Not necessarily, not everyone gets a rate increase, but if you do, we want you to be aware of some of the possible reasons why...

Upward Rate Potential

Commercial Auto Insurance - A dramatic increase in claim frequency and large claim payouts over the last few years has reduced auto insurance availability and driven premium rates up, sometimes significantly. Both distracted driving and labor shortages are contributing factors. Many industries are reporting difficulty filling driver positions. Adding less experienced drivers can drive up auto claims. Many claims have gone vertical, often exhausting the primary auto limit and tapping into the excess/umbrella liability limits.

General Liability and Excess/Umbrella Liability - Multiple years of soft (low) general liability rates coupled with high jury awards has created a situation where premium rates are inadequate to absorb long-tailed liability costs. Rates are expected to increase 5%-15%...possibly more for businesses operating in higher risk industries such as construction and aviation or for businesses with a claims history.

Property Insurance - Wildfires and hurricanes have led to national property losses in excess of $80 billion in 2018, $200 billion in 2017. This has driven many insurance carriers out of the market. The resulting more limited carrier participation/availability is pushing property rates up, typically 10%-20%...but possibly more like 30%-40%+ for some loss affected accounts.

Management Liability (Directors & Officers, Errors & Omissions, Employment Practices, etc.)

- Management liability policyholders are in the middle of an upward rate adjustment in the range of 5%-20%+. The rate increases are due to a rise in the number and cost of the claims being filed. Causes such as "event-driven" litigation (where plaintiff attorneys react to negative news by filing litigation), as well as the Boeing plane crashes, the PG&E wildfires, the #MeToo movement and cyber breaches, have all led to management liability litigation. The average rate increase over the last year or so, across the U.S., is about 15%. The good news is that industry experts are reporting that this adjustment has begun to deliver some profitability back into the management liability market.   

Downward Rate Potential

Workers Compensation - Workers compensation claims have been decreasing over time. This can be attributed to safer work environments, a better understanding of modified duty and return to work programs, and faster incident response time through automated safety and claim tools. Businesses with minimal loss experience may see 5%-10% rate reductions in 2020.

In Summary

Insurance claims are driving pricing.

Underwriters are being more selective as they face increased pressure from management to deliver profitability. They will not quote every account submitted to them. Instead, they will pre-qualify accounts, scrutinize the information they are given, and depend on strong relationships with insurance professionals that have a reputation for understanding the risks involved and for placing profitable business into the marketplace.

Creativity, resourcefulness, and trusted relationships will be the name of the game in negotiating the insurance market in 2020. Perhaps now is the time to consider, or plan for, a partially self-funded insurance plan? We know that COVID-19 showed us the importance of business income coverage


VANTREO is here to help. If you would like more information on insurance rates or have any insurance or risk management question at all,  just let us know. Reply here.