Market Hardening Sharply, Brokers Say

A survey of agents and brokers indicates that insurance became more difficult, and in some cases nearly impossible to obtain in the fourth quarter of 2001, while premium rates rose more sharply than earlier in the year.

The Washington-based Council of Insurance Agents and Brokers released its quarterly Commercial Insurance Market Index last week, reporting that producers are seeing significant premium hikes across-the-board.

“This is not a crisis situation yet, but the uncertainty and confusion our members find when trying to place certain lines are sure to contribute to an overall unsettled business environment,” said Ken Crerar, president of CIAB, in a statement. “Its too early to tell whether this disruption is a short-term response to the trauma of Sept. 11 or a more permanent market condition.”

CIAB said producers reported the most difficult underwriting and most significant rate hikes were in New York City and Washington, D.C., where the terrorist attacks took place on Sept. 11.

Generally, terms and conditions have become tougher and deductibles are higher, the association said. Terrorism coverage is scarce and clients, in many cases, are going bare because the price is too high even when insurance is available, CIAB added.

Insurers are also looking for more information about risks, while the underwriting process has moved “from strict to burdensome in many cases,” CIAB said. The association added that some brokers are reporting that insurers want as much as five years of loss history and extensive financials on potential insureds.

More brokers are turning to alternative markets, CIAB noted, and there is also an upsurge in business going to the excess and surplus lines market, especially for umbrella and property risks.

The survey of 140 CIAB members reports that respondents have seen no decreases in premium rates over last year. Indeed, only 1 percent of those surveyed said they saw no change at all in rates.

The surveys report breaks responses down into results for small-size firms ($25,000 or less in commissions and fees); medium-size (between $25,000 and $100,000); and large firms (in excess of $100,000).

Combining the three groups together, and averaging the total, 56 percent of respondents said they saw rates go up between 10 and 30 percent over last year in the fourth quarter, while 30 percent said rates rose between 30 and 50 percent. Six percent of the respondents said rates rose between 50 and 100 percent. Less than 1 percent said they saw rates more than double.

When asked about seven lines of property-casualty and liability business, the response was overwhelming that increases were seen across-the-board. Only 1 percent of respondents said they saw a decrease, and that was in commercial auto. Otherwise, the majority said they saw rates go up.

Among the individual lines:

Some of the sharpest increases were seen in umbrella coverage, where 13 percent of the respondents said rates were up more than 100 percent over last year, while 28 percent said rates were up between 50 and 100 percent.

Commercial property was next, with 26 percent saying rates rose 50 to 100 percent over last year, and 66 percent reporting rates up between 10 and 50 percent. Five percent said rates more than doubled.

Nineteen percent of respondents said construction coverage costs rose between 50 to 100 percent, while 63 percent said they saw rates up between 10 and 50 percent.

Sixty-five percent saw business interruption increases of 10 to 50 percent, while 11 percent reported premium increases of more than 50 percent.

In group medical, 49 percent reported increases of between 10 and 30 percent, while 17 percent said they saw rate hikes of between 30 and 50 percent. Only 2 percent said rates were up between 50 and 100 percent, and none reported increases of more than 100 percent.

A complete chart of the survey results is available at www.ciab.com.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 21, 2002. Copyright 2002 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.

Contact Webmaster

Special Reports /

Market Hardening Sharply, Brokers Say

Related Stories

Recommended For You