An overview of The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Index Q1/2024 and marketing conditions beyond.
Each quarter, The Council of Insurance Agents & Brokers releases its Commercial Property/Casualty Market Index. Here, we review the 1Q 2024 findings, which utilize data from January 1 through March 31, 2024. We also consider current conditions to provide context for risk transfer solutions and strategic planning for emerging risks.
PREMIUM PRICE CHANGES
Though some might think it boring, sometimes the status quo isn’t such a bad thing, especially when premium rate increases are the topic for consideration. Respondents of the CIAB’s first quarter market report noted “not much change” from the previous quarter, which was welcome news considering past levels.
Commercial insurance consumers of all sizes saw premium increases for the 26th consecutive quarter. Rates were up 7.7%, which was just slightly above the previous quarter at 7.0%. While both small and large accounts increased by 7.3%, medium accounts experienced the highest increases for the fourth consecutive quarter, coming in at 8.5%.
Premium increases impacting all lines of business insurance continued to moderate with most coming in flat or lower than those in the previous quarter. The average increase for all lines was 5.8%, just slightly up from 5.7% in 4Q 2023. Commercial auto was the only outlier in this period, coming in considerably higher at 9.8%, up from 7.3%.
Commercial property stood out once again with the highest increase of all lines at 10.1%, lower than the previous quarter but still significantly higher than most lines. Respondents continued to find commercial property “one of the most difficult lines to place due to stricter underwriting, property value increases, and the amount of detail required in submissions.” Amid this environment, market competitiveness seems to be building at a cautious pace.
However, CRC Group warned about getting too comfortable with the promising conditions, noting in a recent REDY Index, “While the market shows signs of stabilization, it remains vulnerable, being just one or two events away from potential disruption. Despite recent improvements and adjustments, external shocks or unforeseen events could still cause considerable volatility or upheaval in the market.”
A bright spot in the coverage landscape once again was workers compensation. The line persisted to maintain rate changes in negative territory for the ninth consecutive quarter, repeating a rate of -1.8% for the first quarter of the year. D&O decreased for the second time in the past year, though not consecutive, with changes in negative territory as well at -0.8%.
NOTABLE LINES OF BUSINESS
Commercial Auto
Since late 2011, commercial auto premiums have increased steadily. The first quarter of 2024 saw more of the same as the line came in with the second highest rate increases after commercial property at 9.8%. Respondents agreed that the line was “more difficult” in the first quarter.
The likely culprits were increasing vehicle maintenance and repair costs, which caused claims expenses to escalate and premiums to rise. “According to data from the U.S. Bureau of Labor Statistics, vehicle maintenance and repair costs have risen by 23% since 2022, which naturally pushed up claims costs and in turn premiums,” the report stated.
Also at work were the long-tail impacts of inflation and supply chain issues from the pandemic that continued to plague the procurement of parts necessary for vehicle repairs, making it more expensive and driving costs up.
Nuclear verdict awards have been on an upward trajectory since 2010, and they continued to play a role in premium pricing, with the transportation industry taking the brunt of the hits. “Approximately one in four auto accident trials that resulted in a verdict of $10 million or more involved a commercial trucking company,” according to the Chamber of Commerce Institute for Legal Reform.
Often overlooked beyond the high-dollar jury awards are the less notable or hidden costs of litigation, including harm to brand reputation, impact on shareholders when a case is public-facing, and the financial impact of a drawn-out proceeding and following appeal on business operations.
D&O
This quarter, D&O was one of only two lines to see a decrease in premiums. Respondents noted that the significant drop in rates since their peak in 2020 was in response to excess capacity and lack of demand compared to previous quarters.
Though softening is expected to continue into 2024, CRC Group noted that “ongoing global conflicts, inflation, financial difficulty due to higher interest rates, and political elections could impact the D&O market during 2024.”
Looking ahead, forecasters at the National Oceanic and Atmospheric Administration (NOAA) have predicted a well-above-average hurricane season (85% chance) with an expected 17-25 named storms—including 8-13 hurricanes with 4-7 that are Category 3 or higher. This is another reason to plan for the safety and resiliency of your business ahead of any catastrophic event or market changes.
To secure optimal premium rates and coverages, business owners should engage an expert insurance advisor who not only understands the intricacies of their business but also the risk transfer solutions available amid the challenges of today’s market realities.
Email bevrlee.lips@ioausa.com for the full report.
