The market continued to harden into Q3 2020, according to results from The Council of Insurance Agents & Brokers’ quarterly Commercial Property/Casualty Market Index. Respondents reported moderate-to-significant increases for all account sizes and all commercial lines, including Workers Compensation. The average increase in premium pricing for all-sized accounts again broke double-digits in Q3 2020 at 11.7% compared to the previous quarter.
Umbrella had the highest average price increase, at 22.9%, up from 20% in Q2 2020. Directors & Officers also recorded a significant average price increase of 16.1%, followed by Commercial Property with an increase of 14.2%. Prices also continued to increase for Workers Compensation, with an average increase of 1.5%, signifying that the 21-quarter streak of price decreases for that line has indeed come to an end.
“It’s clear the pandemic has accelerated the market conditions observed in previous quarters,” said Ken A. Crerar, president/CEO of The Council. “The financial stress from the extended economic contraction has contributed to increased premium pricing across the board, heightened insurer wariness and reluctance to take on additional risk. It’s critical for brokers to act as trusted advisors for their clients and help them through this troubled time.”
In terms of underwriting, 90% of respondents reported carrier capacity for Umbrella risk decreased in Q3 2020, demonstrating a significant crisis in capacity for the line. Nearly 80% of respondents also said that capacity for Commercial Property was cut substantially in Q3 2020, with respondents citing an already-severe natural catastrophe season, characterized by out-of-control wildfires in California, a tornado outbreak in the Southeast, the August derecho in the Midwest and major hurricanes.
In general, the reduction in capacity observed in Q3 2020 was coupled with increased deductibles, reduced limits, and more scrutiny from the carriers. Respondents described significant loss control requirements in Q3 2020 and reported that carriers were asking for detailed financials/business income statements from the insureds. Many respondents also reported additional communicable disease exclusions and increased scrutiny about COVID-19 preparedness.
Aside from “driving organic growth” and “recruiting and developing talent,” which have topped the list of respondents’ top three priorities and challenges for years, “maintaining employee health and wellness” was also a top-three challenge. “COVID-19, the election, etc… Insurance folks are working harder than ever during the pandemic and trying to keep it together. It’s hard for everyone right now,” said one respondent from a large Northwestern firm. Respondents highlighted the negative effect the extended period of working from home was having on their employees’ mental health as well as on company culture.
But most respondents acknowledged that “maintaining employee health and wellness” is of the upmost importance, because it will help the organization weather the ongoing pandemic and contribute to driving organic growth and recruiting and developing talent during this period. According to one respondent, “Our people are our #1 asset. We invest in our people with the best benefits, support and mentoring we can muster so that the best stay and can then act as word of mouth recruiters.”