Commercial Insurance Rates Forecast for 2021

Between natural catastrophes, COVID-19, and other market pressures, the property and casualty insurance industry was tested in extraordinary ways last year. According to a market outlook report in June 2020, the industry was just beginning to see the pandemic’s effects across the market place with rate increases, capacity reduction and tighter underwriting across all lines. And now with 2020 finally behind us, comes with an updated report highlighting the rate changes and trends expecting to impact insureds this year. Although the market has already significantly firmed this past year, continued uncertainty from potential COVID-19 related cases, higher than normal judgements, catastrophe losses, and additional factors have insurers rising rates, lowering capacity, limiting or transferring risk, and taking a harder look at each risk profile. Below are some of the market challenges to expect this upcoming year.

PROPERTY

The use of selective capacity by carriers continues to restrict their offerings, especially as it relates to natural catastrophes. Carriers are carefully managing exposures for property clients exposed to hurricanes, wildfires, tornado, and hail events. This strategy has pushed many buyers into shared and layered property policies. These policies tend to be more expensive than the single carrier solutions that were common in the soft market. Carriers are also reporting substantial loss results from communicable disease coverage afforded under 2019-2020 property policies. Event cancellation insurance carriers have also paid large losses related to shutdowns around the world, with many lawsuits still in court and impacting the carrier’s expenses. In an important change, many property policies issues after March 15, 2020, will include an absolute Communicable Disease/Pandemic exclusion.

CASUALTY

Rate increases, capacity restrictions, and tighter underwriting standards are commonplace in the casualty market. 2021 will usher in the fourth year of a hard insurance market for Commercial Automobile Liability lines, and the third year of a hard market for General/Products Liability and Umbrella/Excess Liability. The impact of “social inflation,” which includes nuclear verdicts, increased use of expert witnesses by plaintiffs’ bar, and higher settlements and jury awards are resulting in severe claims payouts that are multiples of what they were even five years ago, which is putting significant pressure on rate adequacy. These developments, coupled with the uncertainty that the pandemic will have lasting effects on the industry, will result in this hardening market continuing well into 2021.

EXECUTIVE AND PROFESSIONAL RISK

Premiums are on the rise for public company Directors and Officers Insurance, primarily due to the uncertainties around COVID-19 and increased litigation frequency and settlement payments. While premium increases in the private sector and the not-for-profit D&O market have not been as severe, increases in retention and excess premium are very likely. As instances of network intrusions and ransomware events increase and escalate, the cyber insurance market continues to show trends of hardening. This is primarily being driven by historically low premium rates, spiked levels of ransomware events, and diverse network intrusion attacks across multiple industries. Insurers are struggling to balance increased extortion demand amounts against premiums amounts collected.

UMBRELLA/EXCESS LIABILITY

Umbrella & Excess Liability continues to be the most challenging casualty line to place, and it seems that each year it becomes increasingly more difficult to place business into the market. Insurers continue to cite the negative impacts of “social inflation” as the main reason why Umbrella/Excess capacity and rates are being impacted more than any other liability coverage, with a few exceptions.

As we move into the new year, Hawley & Associates will remain close to industry and market developments so we can best guide and support our clients through current and future challenges. We thoroughly understand your operations and can clearly and effectively articulate your needs to insurers. We work by your side to navigate the insurance marketplace and secure the best coverage at a price your organization can afford. Contact us or request a quote from one of our specialized brokers on how we can best protect your mission.

Common Insurance Obstacles Nonprofits Face

The nature and business goals of nonprofit organizations are unique; therefore, their insurance coverage must be too. Nonprofits employ income-reliant individuals while also facing obstacles such as donor retention, stewardship, and volunteer liability all while championing for a worthy cause. And with different organizational goals also comes different requirements for insurance coverage. In order to provide the appropriate coverage, insurers must understand the key trends in the nonprofit sector as well as the individual needs of each nonprofit. In an effort to highlight the challenges faced, a report was published that surveyed 200 nonprofits about their biggest challenges when it comes to selecting insurance policies. Here are some of the top challenges faced.

FINDING THE RIGHT PRICE

While there are some nonprofits that have extremely high revenues and successful executives, they are not intended to make people rich. Just like a small business, one liability claim can wipe out an entire organization. Finding an affordable policy for a nonprofit that will also help it come out on top after a liability claim can be nearly impossible without the proper broker. On top of this, nonprofits face more risks due to the diverse settings in which they pursue their mission. Organizations that work with children, youth, and social services are seeing the sharpest increases in premiums due to a nationwide upsurge in claims.

According to the report, the number one reason that nonprofits will change their insurance provider is because of a significant price increase. To help mitigate the cost of coverage and give insureds more value for their money, insurers often give amenities to nonprofits. These services might include group purchasing discounts, background checks for prospective employees, and consulting services. Working with a broker who deeply understands your organizations specific needs is critical to securing the correct coverage for your mission.

UNDERSTANDING THE POLICY AND GETTING THE RIGHT COVERAGE

In order to understand what types of coverage to purchase, nonprofits must be aware of all their risks, which can vary depending on what types of populations they serve. The use of volunteers also brings different levels of liability exposure. Volunteers can be more prone to injury if they do not know proper procedures and typically possess less loyalty to the organization than a standard employee. These types of risks can be covered by General Liability Insurance to defend against third-party claims.

No two nonprofits have the same exposures, but a needed area of coverage for all organizations is Directors and Officers Insurance. Without D&O insurance, board members can be held responsible for funding lawsuits with their own personal assets. Forty-one percent of nonprofits indicated confusing policies as the reason they would not select a certain coverage, which is why partnering with a specialty broker who has experience working with nonprofits is critical to be properly covered.

RETAINING DONORS

Donor retention is a common issue for many nonprofits. Not only is it difficult to attract donors, it is even harder to keep them coming back. The coronavirus pandemic has only made this task more challenging, as all in-person fundraising events had to be made into virtual events where many organizations did not see the same turnout they had the year before. Recognizing this, insurers know that their nonprofit clients base a higher value on the integrity of their relationships than for-profit companies do. While an ever-changing market and other factors make it nearly impossible to determine a recipe for perfect coverage, insurers are working to identify specific trends that cater to the unique goals of those who fight for the greater good. And for that, we applaud them.

When looking for insurance for your nonprofit, it is especially critical to have a broker who specializes in nonprofit needs. Hawley and Associates thoroughly understands your operations and can clearly and effectively articulate your needs to insurers. We work by your side to navigate the insurance marketplace and secure the best coverage at a price your organization can afford. Contact us or request a quote to speak with one of our specialist brokers on how we can best protect your mission.