CIAB Survey Finds Markets In Distress
The commercial insurance market is becoming increasingly distressed, according to the Council of Insurance Agents and Brokers.
Indeed, the Council's first-quarter 2002 index tracking rate changes shows that premiums have jumped significantly to go along with growing problems with capacity, with more and more brokers turning to the excess and surplus lines market to find coverage for their clients.
"Were seeing the trickle-down effect of rate increases," said Ken A. Crerar, president of the Washington-based Council, in a statement. "Over the last three months, we have moved beyond initial difficulty with high-profile or high-exposure properties to an environment where the broader marketplace is affected."
He added that the Council's market surveys since January 2000 "have shown that harder market trends began well before Sept. 11, [2001]–they have really picked up steam since then. Leaders from throughout the industry have warned Congress that action is needed and needed now," he said, underscoring the need for a federal reinsurance backstop to bring private carriers back into the market.
Of the 157 agents and brokers across the country surveyed, 76 percent said premium rates rose between 10 and 50 percent in the first quarter, with 21 percent reporting jumps in the 30-to-50 percent range. Six percent said they saw rates on large accounts (those with commission revenue over $100,000) go up between 50 and 100 percent.
Those surveyed reported increases across all seven lines of business they were asked about. More than 90 percent reported that the high-end of the range of increases theyd seen was over 100 percent.
The Council said comments from those surveyed revealed that capacity is becoming an increasingly big problem for some programs, such as aviation, cargo, commercial auto, construction, hospitals, marine, nursing homes and trucking. They also reported an increasing number of exclusions or sharp coverage restrictions by insurers related to asbestos, earthquakes, mold, terrorism, windstorms and other specific risks.
In general liability, 62 percent reported increases in the 10-to-30 percent range, followed by 17 percent in the 30-to-50 percent range, and 13 percent in the 1-to-10 percent range.
Umbrella coverage also showed significant increases, with 29 percent of those surveyed saying they saw increases ranging from 50 percent to more than 100 percent, and 61 percent reporting that prices had risen between 10 and 50 percent.
Only 59 percent of respondents said they saw increases in the cost of surety bonds–the lowest percentage among the seven lines. Forty-eight percent of those who do handle surety bonds said they saw increases ranging from 1-to-30 percent. However, 31 percent of those surveyed said they did not know or did not handle the line.
Other notable results include:
92 percent said they saw increases in commercial auto, with 55 percent noting that rates jumped between 10 and 30 percent.
Of the 88 percent seeing increases in business interruption, 47 percent saw rates rise from 10-to-30 percent, while 22 percent saw hikes of 30-to-50 percent.
Group medical was also surveyed, with the majority of respondents reporting increases in the range of 10-to-30 percent.
The first-quarter rate hikes come on top of similar increases reported during the Jan. 1 renewal period, CIAB said.
Details of the report can be found at www.ciab.com.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 29, 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.
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