Market Hardening In A Hurry, Brokers Say

More evidence has come out indicating that it is getting tougher for commercial lines accounts to find insurance among primary carriers, and they are increasingly turning to the alternative market for help.

The Council of Insurance Agents and Brokers released a benchmark survey last week that found insurance carriers tightening policy terms and conditions “significantly” as rates continue their upward spiral. These developments, brokers say, are forcing them to turn to alternative market vehicles to fill their clients' coverage requirements.

The survey of 103 brokers compares the property-casualty market of Nov. 1, 2000, to Nov. 1 this year.

Brokers surveyed said carriers have imposed “more restrictions and higher deductibles, as well as eliminated blanket limits for some lines.” Carriers are also requiring more information about risks before renewals, brokers noted.

“[The] findings confirm what industry leaders have said since Sept. 11–carriers are looking at exposures risk-by-risk and deciding what to cover and at what price,” said Ken Crerar, president of the Washington-based CIAB. “It seems consumers dont find and cant get the same coverage they got a year ago, even with higher rates.”

Because brokers are finding it difficult to place commercial risks, more and more are turning to the alternative market, the survey found. Of the 103 respondents, 44 percent say they are tapping alternative markets to meet their clients risk-transfer needs.

The survey also found that a significant number of brokers are turning to the excess and surplus lines market for coverage.

The survey reported no downward movement in premium rates in any line. Only 3 percent of respondents said they saw no premium change in workers' compensation, while only 1 percent saw no change in either umbrella or business interruption insurance. The remaining lines–auto, property, general liability, reinsurance and aviation all saw increases. Those surveyed said most of the increases they have seen over the last year were in the 10-to-30 percent range.

Medium-size brokers (those with commissions and fees between $25,000 and $100,000) and large brokers (over $100,000) saw the most dramatic price increases. Twenty-four percent of medium-size brokers and 34 percent of large brokers reported premium increases between 30 and 50 percent. Only 8 percent of small brokers (less than $25,000) saw such high increases.

The Council said the lines most affected by the Sept. 11 terrorist attack–property and umbrella–have reported dramatic increases. Forty-six percent of brokers said property rates have risen as much as 30-to-50 percent, while 44 percent said umbrella has risen by the same amount.

Rate hikes of over 50 percent are also being reported in nursing home liability, construction, aviation, trucking and workers comp in some states, CIAB said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 26, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Market Hardening In A Hurry, Brokers Say

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