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Commercial insurance buyers can expect to pay more across most lines of business for the rest of 2019 as insurers take a more disciplined approach to pricing and underwriting, according to a report issued Thursday by Willis Towers Watson PLC.
Catastrophe-exposed commercial property risks with losses can expect price increases of 15% or more, while heavy loss-hit catastrophe-prone accounts will see increases of 30% to 50% or more, Willis said in its Insurance Marketplace Realities 2019 Spring Update report.
After years of falling commercial property rates, there has been a shift in insurer attitude following the worst back-to-back catastrophe loss years on record in 2017 and 2018, according to the report.
“Property market conditions have exhibited a decided firming, even for benign risks, driven by two consecutive years of high cat losses, attritional losses and 11(-plus) quarters of rate decreases prior to 2018,” the report stated.
In the United States in particular, ongoing increased economic activity is boosting production and construction, the report said. As a result, there are more cars on the road and a greater number of workers employed, meaning more risks and demand for coverage, Willis Towers Watson said in the report.
Another factor driving loss costs is rising business interruption values and increased costs for replacement supplies and materials, as well as labor, the brokerage said in the report.
For casualty risks including general liability, auto and umbrella, the market is “strained,” with deteriorating loss trends affecting insurer profitability, the report said.
Auto liability rates are expected to increase 6% to 12% for the rest of 2019, as escalating loss costs continue to make this an unprofitable line for insurers, according to the report.
From 2016 through 2018, the average claim payment for bodily injury rose 6.7%, and personal injury protection claims rose 4.8%, according to the report.
“2018 will be the eighth year of a combined ratio in excess of 100 for auto lines,” Willis Towers Watson said in the report.
There has been an uptick in the number of cases alleging sleep apnea and sleep deprivation as key contributing factors in auto accidents, and employers have been found legally liable for damages as a result of not properly managing fatigue and sleep issues, according to the report.
“With over 43% of the workforce indicating they are sleep deprived, this is becoming a major issue for risk managers,” Willis Towers Watson said in the report.
Other casualty lines are expected to see ongoing firming through the year due to a range of hazards. General liability is foreseen as flat to 4% higher, umbrella liability is expected to be 2% to 6% higher, and excess liability flat to 2% higher, according to the report.
“The North America liability marketplace continues to be hit by significant catastrophic liability losses stemming from many issues, including California wildfire, the opioid epidemic, #MeToo litigation and liberal class action certification. The effects of the wildfire losses and opioid epidemic are being felt on a broad range of risks,” Willis Towers Watson said in the report.
Overall, only two lines of business are predicted to ease, and 10 have been revised further upward since the October 2018 issue of the Willis Towers Watson report.
Escalating losses in the casualty insurance market are expected to trigger upward pricing pressure across most commercial lines of business in 2019, led by a continued rise in premiums in the auto sector, according to a new report from Willis Towers Watson PLC.