Even though the pace of liability insurance rate increases has moderated, a true soft market isn’t on the horizon — especially when it comes to commercial auto, according to a new report from USI Insurance Services.
“Although rate adequacy is slowly being achieved for a growing number of insureds and the pace of rate increases is moderating, we are still not close to entering into a softening market characterized by flat or reduced rates for most insureds,” said the broker in its 2024 P/C Market Outlook. “Social inflationary pressures and rising claims inflation will still negatively impact a subset of insureds with high historical loss severity and frequency as well as those in industries perceived to be inherently hazardous.”
USI forecast rate increases between 5% and 10% for general/product liability. For umbrella/excess liability, middle market buyers may see flat renewals up to 15% increases, while larger buyers will see a range of 5% to 20%, depending on their auto exposures.
Auto liability promises to be a tough market in 2024, according to the report, be it for large trucks or private passenger vehicles. USI reported some new capacity in the market via telematics programs, but at the same time, traditional players have cut back in specific states or pulled out of commercial auto entirely.
“Virtually all” writers of auto liability are expected to press for rate increases in 2024. USI predicted flat renewals to rate increases of 5% for accounts with good loss history and a range of 20% to 30% for more troubled accounts. Excess auto buffer layer price increases in 2024 were projected at 40% or more.
“Increased settlement values in the trucking sector are now spreading to all industries in which vehicles are being utilized for business operations,” USI said. “Negligent hiring and entrustment as a basis for large lawsuits has moved from a fad to a more permanent trend.”
USI also cited a trend for higher primary limits on auto liability, with a $2 million attachment point now the norm. This had the impact of lowering umbrella liability premium. However, the umbrella market “still has some negative realities to deal with,” the broker said.
“Investment in litigation financing is a multi-billion-dollar industry today, and this is expected to double in the next three years. This is occurring for insureds across a broad array of industries, but it’s a particular concern for insureds with large auto fleets as well as those in the hospitality, manufacturing, chemical, pharmaceutical, and real estate industries,” USI observed.
In order to reduce their insurance costs, more buyers have opted to retain more risk by shifting to loss-sensitive programs, the broker said. The strategy allows organizations with good loss experience, solid loss control, and proactive claims management to lower their overall premium with higher deductibles.