The hard insurance market for many product lines continued throughout 2023, with rate pressure, underwriting scrutiny, and capacity restrictions expected into 2024. A strong partnership with your carriers is essential for agents to navigate this hard market, help clients get the insurance protection they need, retain business, and gain new customers.
What Does Today’s Insurance Market Look Like?
Commercial Property and Auto insurance have been among the hardest-hit product lines in the past few years. Commercial Property insurance rates, according to the IVAN Index, on average, rose 10.42% in October, and Commercial Auto insurance rates increased 8.52%.
Commercial Property increases have been driven by the cost of reinsurance, limited new capacity, and continued losses, with higher pricing for risks in catastrophe zones. Many standard markets are pulling back from cat-prone areas, such as the Gulf Coast, Atlantic Coast, and California, and/or are requiring higher named-storm deductibles. Underwriters are also focused on insurance to value (ITV) to provide limits that accurately reflect inflation and rising property values.
Commercial Auto Liability rates continue to rise due to the frequency and severity of losses. In September, Fitch Ratings issued a report stating that it expects the U.S. Commercial Auto insurance segment to remain unprofitable in 2023, with rising claims severity from inflation and burgeoning litigation risk despite continued price increases and underwriting changes. The rating agency expects the segment’s combined ratio (CR) to exceed 106% in 2023.
Underwriters continue to look closely at driver history and safety, training programs, technology use, and best practices when analyzing risk. Furthermore, they continue to investigate vehicle utilization to better understand Hired and Non-Owned Auto exposures.
Specific industries are also more challenging. For example, Builder’s Risk insurance is tough for contractors with high-hazard projects in catastrophe-prone areas. The real estate industry is experiencing rate pressure for Property insurance from rising labor and materials costs, which have increased the cost of rebuilding and repairs after a loss. Insuring the habitational market continues to be challenging, particularly with older buildings not up to code.
Auto dealers with property losses are experiencing difficulty obtaining coverage in the admitted market as more carriers increasingly pull out of specific areas. The transportation segment remains a tough niche market for brokers, as auto losses have returned to pre-pandemic levels.
Succeeding in Today’s Hard Market
Looking ahead to 2024, take the time to analyze your book of business to determine which niche markets in which geographic locations are profitable and aligned with your carriers’ appetites. Focus your marketing strategy on these segments and territories. Beef up your marketing campaigns to target these segments with a product offering that distinguishes you in the market.
For challenging niche segments, work with wholesalers and MGAs with carrier relationships in the Excess & Surplus market that will step in when the admitted market is no longer available.
In addition, you can leverage a wholesaler’s expertise in specific niches and challenging risks. A wholesaler can assist you when you have questions or want to review specific coverages, compare coverage terms, and obtain insurance placement.
Work Well In Advance of Insurance Renewals, Deliver Complete Submissions
Meet with carriers well before the renewal (90 to 120 days) to thoroughly analyze prospective solutions to address price changes. Solutions may include higher retention levels and deductibles. Seek underwriter commitment to broad renewal terms early in the process and allow for enough time to underwrite the risk, answer any questions, and get the required documents to the underwriter. A complete submission will get your accounts to the top of the underwriting pile.
For example, for Commercial Property insurance, the relevant documents you should submit include ACORD applications, any supplemental apps and questionnaires, SOVs (statements of value), COPE (construction, occupation, protection, exposure), appraisals and/or a Marshall Swift Report, and three- to five-year loss runs. In addition to completed applications, supplemental apps, loss runs, and any relevant questionnaires, Commercial Liability submissions require revenue declarations, subcontractor fees (if applicable), and vehicle schedules (for Auto).
Convey Your Client’s Story
Provide a tailored narrative supported by data and documentation that demonstrates your client’s commitment to risk mitigation, disaster planning, business continuity, loss control, and safety. Also, specific challenges may raise additional questions while gathering all of the information for a submission. For example, an insured may have incurred a severe loss, experienced significant changes to its operation, such as a substantial increase or decrease in revenue or a shift in location, or completed a significant acquisition. Any of these occurrences could result in considerable premium changes. Let the underwriter know about these changes ahead of time.
Remain in touch with your underwriters, nurturing relationships and keeping ahead of changes that may impact your clients’ insurance programs. Deliver complete and accurate submissions and provide feedback whenever possible to succeed in today’s insurance environment.