The commercial insurance market began 2025 with a shift in momentum — signaling signs of softening for many lines of business and account sizes. According to The Council of Insurance Agents & Brokers’ Q1 2025 P/C Market Survey, average premium increases slowed across the board, though certain sectors remain under pressure due to escalating litigation dynamics.
Overall Premium Trends Show Signs of Relief
Premiums rose by an average of 4.2% across all account sizes in Q1 2025 — a notable 22% decrease from the 5.4% increase reported in the previous quarter. While this marks the 30th consecutive quarter of premium growth, the deceleration suggests increasing flexibility from carriers and a potential shift toward a more competitive market environment.
Middle Market Leads the Softening
The most pronounced change was seen in medium-sized accounts, where average premium increases dropped from 6.4% in Q4 2024 to 3.6% in Q1 2025 — a 42% decline. Industry respondents noted that insurers are beginning to re-engage with the middle market, with more underwriters willing to negotiate and compete. One broker from the Northwestern U.S. stated plainly, “Carriers were starting to re-engage in the middle market.”
Market Softening in Most Lines — Except Auto and Umbrella
The softening trend extended into most lines of business. Five lines even recorded premium decreases:
- Cyber
- Directors & Officers (D&O)
- Employment Practices Liability
- Terrorism
- Workers’ Compensation
This broad softening is attributed in part to increased carrier competition and a noticeable influx in underwriting capacity. For instance, D&O coverage has become more accessible thanks to a more crowded marketplace — a trend highlighted in a recent May 2025 state of the D&O market report.
Litigation Funding Fuels Pressure in High-Risk Lines
Despite these positive shifts, commercial auto and umbrella insurance remain stubbornly hard. These lines experienced the largest premium increases, with auto up 10.4% and umbrella up 9.5%. The driving force? Third-party litigation funding (TPLF).
TPLF — where outside investors finance lawsuits in exchange for a share of the settlement — continues to elevate both the frequency and severity of claims. Respondents across the industry pointed to TPLF’s impact not just on premium hikes but also on changes in policy terms, including reduced limits and tighter underwriting.
As one respondent from a large Southwestern brokerage firm put it, “Third-party litigation funding is hurting the consumer.” In response, underwriters are becoming more cautious — and in some cases, refusing to offer limits altogether for high-risk segments.
What Agents Should Watch Moving Forward
While the market shows encouraging signs of softening, especially for mid-market clients and most major lines, agents should remain vigilant. Litigation trends — particularly those tied to commercial transportation and excess liability — are shaping premium structures and availability more than ever before.
For clients in sectors affected by high-verdict litigation risk, early planning, clear communication, and proactive risk management will be essential to navigating tightening terms. Meanwhile, the softening in cyber, D&O, and EPLI could offer opportunities for clients to revisit coverage levels and pricing with a fresh perspective.
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