Reprinted from the Marsh & McLennan Agency blog.
The commercial property and casualty insurance industry saw a lot of positive developments in 2015, along with new challenges in the area of technology and cyber liability. Overall, the rising tide of an improving economy has also lifted Property and Casualty boats, but uncertainties remain.
Good news on insurance premiums
In general, insurance carriers have seen healthy balance sheets in the past few years. After a period of yearly increases in rates, the current trends suggest that carriers will hold commercial P&C insurance premiums steady or even reduce rates in some cases.
This doesn’t mean that every company will see this moderation in P&C insurance rates. Some areas with higher-risk occupations may still see premium increases, and employers with less favorable loss histories are more likely to see rate increases. But overall, carriers are more likely to reward companies with a history of lower claims.
Workers’ Comp — still a challenge
The trends in Workers’ Compensation insurance have not changed much in 2015, and claims in 2016 will continue to be costly for employers. Employers will need to continue to work to make the workplace as safe and healthy as possible to keep their premium costs in check. Many employers are looking closely at their hiring practices to ensure they are hiring the right people for physically demanding jobs. And the question of whether some claims are shifting from medical insurance to workers’ comp is still a concern.
With more and more people covered as a result of the Affordable Care Act, it’s very possible that some individuals might try to take advantage of the better deal (for the consumer) that Workers’ Comp coverage provides. Companies need to have strong policies in place to protect themselves from Worker’s Comp fraud.
One recent trend in the Workers’ Comp area is beefing up a company’s “Return to Work” policy, usually by giving injured workers part-time or transitional work until they’re ready to go back to their original job. This can have tremendous benefits; it enhances recovery, reduces depression and improves morale overall. A strong commitment to helping workers ease back into their jobs can pay off in many ways for an employer.
Cyber liability — not just for big business anymore
Perhaps the number one concern among P&C industry insiders is the growth of cyber crime and other similar risks, such as social engineering. Whether a company has its network hacked or is put at risk because of an employee’s mistake, these kinds of claims can be costly in terms of money and reputation, and can be very difficult for a mid-size employer to manage.
Recent years have seen headlines about a customer data breach at Target, employee information hacked from the U.S. Office of Personnel Management, and other data breaches. With such high-profile cases, the vulnerability of data has been a major concern for large employers. But P&C insiders stress that it’s not just the large companies that are at risk. Midsize and smaller businesses are also vulnerable; in some cases they make a more attractive target because they are less likely to have adequate resources devoted to cyber and data security. Every employer should be aware of this risk and take steps to protect his or her company.
The good news for businesses is that insurance carriers are getting a better handle on how to judge the risk around these issues, and are beginning to adapt their insurance offerings to provide more protection. Although the offerings can still be limited at times, carriers are catching up with technology advances and the risk management best practices that are being adopted by employers and proven effective. Midsize companies in particular should be able to find more options in the area of Cyber liability insurance.
Climate still a concern
The past year was relatively free of climate-related disasters, so the buzz around flooding, storm damage, and other weather-related property claims has diminished. But it’s safe to assume that climate will continue to be a topic for discussion, and a concern for employers. Right now, the insurance carriers seem to be satisfied that their current policies can handle threats in the near future.
Likewise, worries about terrorism lessened in 2015, only to pick up again after the recent Paris attacks and shooting in San Bernardino, Calif. In the U.S., the extension of the Terrorism Risk Insurance Act in January 2015 ensured that there would be a government-guaranteed reinsurance backstop in case a major terrorist event.
A changing relationship
The relationship between client, broker, and carrier continues to evolve; more and more data is available — and not just available, but useful. New software applications are coming at a dizzying pace, and many of them are designed to help businesses understand data that used to be relevant only to carriers and brokers.
Because of this, a model of strategic partnerships between the different parties is emerging. Brokers and carriers will need to elevate the customer experience — the days of simple transactions are numbered. A more engaged relationship will help not only the client but the broker and carrier as well, by providing immediate feedback on what works — and doesn’t work — for commercial P&C insurance clients.
Have you Liked us on Facebook?