NEWS RELEASE – FOR IMMEDIATE RELEASE
Contact: Zachary West
Associate, Market Intelligence & Insights
UMBRELLA AND D&O INCREASES IN EXCESS OF 15%,
COVID-19 CONTINUED TO IMPACT MARKET,
ACCORDING TO CIAB MARKET SURVEY
WASHINGTON, D.C. — August 24, 2020 — The COVID-19 pandemic and other issues with commercial lines continued to put stress on the market in Q2 2020, according to The Council of Insurance Agents & Brokers’ quarterly Commercial Property/Casualty Market Index. Survey respondents reported slight-to-significant increases for all account sizes and all lines of business, including Workers Compensation. The average premium price increase for all-sized accounts broke double digits in Q2 2020, at 10.8%, compared to 9.3% in Q1 and 7.5% in Q4 2019.
Umbrella and D&O increases were the highest among all lines, at 20.0% and 16.8%, respectively, followed by Commercial Property at 13.3% and Commercial Auto at 9.6%. A pricing increase for Workers Compensation was recorded for the first time in 21 quarters, at 0.7%.
“While workers compensation decreases have often offset increases in other lines, this line of business may have reached an inflection point in Q2 2020,” said Ken A. Crerar, president/CEO of The Council. “And though increased pricing was evident in previous quarters, it is also clear COVID-19 has had an impact, ushering in new pandemic exclusions, more scrutiny for new business, and significantly decreased capacity for related lines.”
In Q2 2020, 70% of respondents reported a decrease in capacity for Umbrella, D&O, and Commercial Property. Respondents also noted that carriers continued to reduce Umbrella limits while raising premiums and increasing deductibles, citing social inflation and the increasing frequency of nuclear verdicts, as well as a hardening reinsurance market. Carriers also increased scrutiny of D&O by adding more questions for new or renewal accounts, including questions about COVID-19 risk.
The impact of COVID-19 was also seen in the rise in demand and the rise in claims for Business Interruption. Sixty-one (61%) percent of respondents reported an increase in demand for Business Interruption, compared to 47% in Q1 2020 and just 18% in Q4 2019, before the pandemic. The vast majority (94%) of respondents also noted an increase in claims for Business Interruption, compared to 75% in Q2 and 18% in Q4 2019—though it should be noted this does not necessarily mean those claims were successful. Indeed, some respondents commented that their clients were filing Business Interruption claims “to make sure they are on record of loss to the carrier pending a landmark/high profile decision.”
COVID-19 did not only affect pricing, underwriting, claims volume, and demand—it also posed organizational challenges for brokers to include maintaining the health and wellness of their employees Several respondents commented that the pandemic led to increased feelings of isolation in their employees working from home, as well as increased anxiety. “Employees are not comfortable in this new setting of working from home. They adapt but the personal interaction is missed,” said one respondent from a large Northwestern firm.
Still, brokers felt that the pandemic offered an opportunity to adapt their selling methods to the virtual age. As one respondent from a midsized Midwestern firm said, “Those that have been able to adapt their presentation and service style to a virtual world will come out as winners. Showcasing the resources developed to help clients through this new environment will produce dividends in new business going forward.”