Market Continued to Harden in Q4 2019: CIAB Survey

The market continued to harden in Q4 2019, according to The Council of Insurance Agents & Brokers’ quarterly Commercial Property/Casualty Market Survey. Respondents reported rising premiums for all account sizes and all lines of business, with the exception of Workers’ Compensation, a notable trend in previous Council surveys. Premium prices increased by an average of 7.5% across all-sized accounts, compared to an average increase of 6.2% in Q3. Large accounts were again hardest hit in Q4 2019, with an average increase of 9.4%, followed by medium accounts with an average price increase of 8.0%. Small accounts saw an increase of 5.2%.

Source: CIAB | Published on February 27, 2020

P&C industry records underwriting gains

“Q4 was a difficult quarter for insurers, brokers and clients alike,” said Ken A. Crerar, President/CEO of The Council. “The increased frequency and severity of Commercial Auto, Umbrella and D&O claims were linked with higher premiums and significant tightening in underwriting. While other lines did not experience such notable shifts, there was evidence of the firming market. It’s crucial now for brokers to position themselves as ‘trusted advisors’ by helping their clients understand and navigate current market conditions.”

Across the five major lines The Council monitors, premium pricing increased by an average of 7.6%. Two of those five major lines, Commercial Auto and Umbrella, had average price increases of 10.5% and 13.6%, respectively—the first quarter pricing increases have broken double digits since 2003. Commercial Auto prices have been increasing steadily since 2011; however, the rate of change for Umbrella prices was noticeably more accelerated than any other line.

Directors & Officers insurance (D&O) also experienced significant rate increases in Q4 2019, at 7.0%. Social inflation, generally defined as a combination of factors—a rising number of securities class action lawsuits and corresponding settlements, the growing popularity of litigation financing and a shift in social trends (e.g., #metoo movement)—was likely correlated to D&O’s larger-than-usual average price increase of 7.0% in Q4 2019, according to respondents.

Moderate to significant tightening in underwriting capacity was also observed for Commercial Auto, Commercial Property and Umbrella, and many respondents reported that carriers demonstrated a decreased appetite for risks related to Commercial Auto, Commercial Property and Umbrella. For example, respondents said that some carriers refused to cover standalone Commercial Auto, and sought higher attachment points—$2 million instead of $1 million, generally—for their Umbrella policies.

The primary broker challenge identified by respondents in Q4 2019 was hiring young talent. For many respondents, hiring and training entry-level employees required significant investment and had slow returns, as many trainees would often leave the company.

As for broker priorities, many respondents described a need to find a niche in the current market. The use of data was a key theme when it came to specialization and client conversations around limits and pricing. In the words of one respondent, “clients are demanding better benchmark data in order to make limit and deductible decisions.” In general, respondents agreed that it was crucial in the current market to find ways to demonstrate the value they add for clients.