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After years of declining of flat rates for property and commercial liability policies, the U.S. is seeing a reversal, causing businesses to pay more for insurance. Insurers have started to raise prices more aggressively in 2020, regardless of the size of the business, which can end up putting a bind on smaller businesses looking to stay protected but without having to rearrange their finances. To make matters worse, business owners can expect to see only more rate hikes throughout the year.
According to data from A.M. Best, pretax operating income for the U.S. property-casualty insurance industry fell by eight percent between 2014 and 2018, even as revenue from premiums grew in that same time frame. Taking other investments out of the picture, the industry as a whole lost money from underwriting in 2016, 2017, and 2018.
Prices on practically every type of insurance, save for workers’ compensation, are rising, especially in the cyber insurance world where threats of major data breaches and cyber-related risks continue to dominate headlines. Rate for property-casualty insurance sold to businesses rose nearly seven percent from a year earlier in the first three quarters of 2019, making it the highest annual increase since 2003.
Insurance rates happen in cycles as periods without catastrophic claims can see insurers competing for customers by lowering their prices. Following natural disasters, such as the major storms of the last couple of years like hurricanes and wildfires, insurers usually raise prices or reduce exposure to some risks.
Even after major events, like storms and fires, insurers aren’t in any danger of running out of funds to take care of claims that businesses and individuals make as they are well-capitalized. But it could be that profits for insurers are being pinched by lower interest rates, which end up reducing income from the premiums they invest.
Insurers are also paying more for non-catastrophe claims as property loss amounts increase due to increasing cost of construction. Bodily Injury liability costs rise due to increasing health care costs and higher judgments being rendered in court cases. In response to this, some insurance companies have reduced the maximum coverage they will provide in a policy as they are not willing to take on more risk from any one company.
Auto liability & physical damage continues to be an unprofitable portion of insurance for personal and commercial insurers as losses continue to rise. Increase costs to repair vehicles and accidents on the rise due to many factors such as distracted driving.
Social inflation is another factor that has been driving rate increases in the liability industry. Companies are being held more accountable for social issues, especially those related to sexual harassment and assault claims.
About Mavon Insurance
At Mavon Insurance, we pride ourselves on our unique approach to insurance. We focus on integrity, communication, professionalism, respect and gratitude to help our clients succeed and place business in specialized markets. For more information about our products, or to become an agent, contact us today at (855) 248-1480.