What’s Up With The Commercial Insurance Market?

By: Hawley & Associates and Lutheran Social Services of Minnesota Risk Management team

You might not realize it, but times have been relatively good for insurance customers. For the most part, premiums have been steadily reducing for years now. In the insurance world, we call this a soft market. But this has changed drastically.

The insurance market is hardening as insurance companies experience higher than anticipated losses. As a result, a hard insurance market is rearing its ugly head. So, what does a hard market mean? It means higher premiums, reduced limits, stricter coverage, and tighter underwriting requirements for most lines of coverage, including: Property, General Liability, Professional Liability, Directors & Officers, Auto, Employment Practices Liability and Cyber Liability.

Natural disasters are mainly to blame for the increase in commercial Property insurance. The 2017 hurricane season and 2018 California wildfire season were some of the costliest on record. Insurers are citing that climate change is a ‘serious’ risk, making storms more intense and therefore most costly. It’s more important than ever to continue to be good stewards of your organizations property and ensure you and your staff have done everything possible with preventative maintenance.

Emerging technologies such as smart features in automobiles (i.e. artificial intelligence, and robotics) have created new Auto Liability exposures. The increasing costs to repair or rebuild those vehicles are another contributing factor for increased premiums. There are always ways to reduce preventable auto accidents. Keep your teams accountable for safe driving practices and processes like no cell phones in your hand and keeping maintenance up to date.

In the child welfare sector – particularly in foster care, adoption, and youth services – we continue to see significant increases in litigation costs, higher settlements, and jury verdicts that can impact several types of coverage including Professional Liability. As a result, carriers are reluctant to offer higher limits. What’s even more concerning are the insurance companies who are exiting the social service market all together, leaving few insurance providers willing to insure the tougher risks. This inherently means much higher premiums overall. One area of professional liability risks in human or social services revolve around staff and volunteers not performing tasks up to industry standards. In most cases, case management and supervision are the key to professional liability risk management. Ways to help ensure case management is being provided at a high standard is to make sure training on procedures is being absorbed as well as that staff and supervisors have scheduled meetings to discuss any challenges that may develop.

The #MeToo movement has had a positive impact on women in our society and sparked long needed conversation and accountability, but it has also brought about higher frequency of claims and high damage verdicts in the Directors & Officers market. This translates into higher payouts for carriers (thus, more trepidation in writing those policies for organizations) and higher premiums to support this trend. Continue to foster a positive and safe culture within your teams and make sure everyone knows the policies and procedures if an incident were to occur.

Cyber insurance is still what we consider an ‘emerging risk’. Since cyber liability is a fairly new risk in the insurance industry, what can happen when things go wrong is still being learned by the carriers and the organizations managing information. Even though the types and volume of claims in this arena are growing, the types of coverage’s and tools to better manage those risks are also growing and improving. Keep cyber security among discussions at staff meetings and ensure your team is implementing the security procedures set in place

Three Key Strategies to help your organization ‘ride out the storm’ in this type of market:

  1. Specialized Broker: Having a broker that specializes in your line of business and knows your organizations unique risks and exposures is imperative in positively representing your best interests to the insurance company underwriters. Hawley and Associates is a niche brokerage specializing in social service and nonprofit organizations. We work for you to advocate with the carriers for the best coverage’s and rates.

  2. Risk Management: A poor loss history paints a concerning picture when taken alone; it tells the underwriter your organization is a bad risk. This can result in even higher premiums or worse yet, denial of coverage or a cancellation notice. By designing and implementing a strong risk management plan, your broker can negotiate better rates, broader coverage, and higher limits with your insurance provider. A strong risk management plan shows your organization is proactive in helping reduce or eliminate claims.

  3. Don’t Hop Around: Believe it or not, jumping from carrier to carrier every year looking for the lowest price can cost you more in the long run. In a soft marker, we have plenty of options but when the market is hard, organizations are left at the mercy of few insurance providers. Underwriters have been known not to quote simply for the fact that the insured is not a loyal buyer. Showing stability and loyalty (even if you have a claim and your premiums increase) is a positive indicator in the eyes of the insurance company underwriter. So, even if you feel like you might be able to get a cheaper auto insurance quote for a certain program, please understand that the strategy for staying the course benefits all programs in the long run.

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