With 2021 just around the corner, it's time to make an overview of the current conditions in the commercial P&C market. Here is a look at the trends that affect the market as we enter the new year.
Support for more interest rate increases
MarketScout reports that commercial interest rates increased for each coverage and industry class during the third quarter of 2020. The total interest rate increase was 6.25% and the interest rate increase for commercial real estate was 7%.
According to Business Insurance AM Best has a "negative" impact on US commercial lines in 2021, with pricing expected to accelerate.
Business Interruption Problems Will Continue
Businesses have encountered unparalleled business interruptions in 2020 as a result of the pandemic and related home orders. Although a vaccine has now been approved, some of this disruption is likely to continue until 2021. At present, business owners and insurers are locked in a legal battle over whether business interruption coverage applies to pandemic-related closures. Insurance Journal reports that insurers have won most of these cases so far, but there are exceptions.
Although coverage of business interruptions for pandemics is questioned, coverage for fires, hurricanes and other natural disasters is widely available – and these disasters are becoming more of a threat. According to NOAA on October 7, 2020, the United States experienced 16 weather and climate disasters with losses in excess of $ 1 billion each year. This makes 2020 the sixth year in a row of $ 10 billion or more. If this trend continues, we can expect 2021 to be another challenging year.
Cyber problems grow
Ransomware has become a particularly harmful threat. Cybercriminals have developed new tactics, often targeting organizations and sometimes threatening to release data instead of just encrypting it. According to ZDNet ransomware attacks have increased sevenfold in the last year.
In addition to ransomware, data breaches, e-mail compromise systems, malware and other cyber threats are also a major problem. Cyberattacks are likely to pose a growing threat in 2021.
The commercial car insurance market hardens
AM Best says that the US commercial car insurance segment experienced insurance losses of $ 4.0 billion in 2019, which is the worst in 10 years. This is part of an ongoing trend of worsening losses for the market.
One reason for this lies in nuclear judgments. The jury has awarded ever larger sums. In an example reported by Freight Waves a Florida jury awarded $ 411 million in a case involving a motorcyclist and a trucking company.
As we enter 2021, it is likely that the risk of jerky jury trials will continue to affect the US car insurance market.
How to prepare
Now more than ever you need a strong independent agency to help you navigate a tumultuous insurance market. At BNC Insurance, we have dozens of reputable carrier partners in many different industry niches. Our experienced brokers can help you compare the available options and find new ways to control costs.
We encourage you to strengthen your protocols and methods to prevent losses now, so your broker has a positive story to present to insurers. Be sure to review claims regularly to make sure they are not too reserved or open longer than necessary. We have not been through a tough market for several years, but from previous experience we know that affordable coverage can be difficult to obtain, so be proactive. BNC Insurance is here to help. Contact us to create a planning review.