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Alera predicts 2021 rate increases across several commercial lines

Posted On: Dec. 16, 2020 2:39 PM CST

rising rates

Alera Group Inc. forecasts rate increases across several lines of commercial insurance in its Property & Casualty 2021 Market Outlook released Wednesday.

The broker said that in addition to broadly higher rates, “insurance buyers can expect to see increases in coverage exclusions along with higher retentions and deductibles.” In addition, renewals will likely take longer as insurers ask more questions and require additional data.

Among major lines, property coverage rates are forecast to rise 13.6% in 2021. Underwriters will prefer risks seen as having lower than average catastrophe exposure while those seen as “higher risk” should expect larger than average price increases as well as lower limits, Alera said.

General liability is projected to rise 11.3% for “virtually all businesses,” Alera said. Tighter underwriting standards are likely and some classes of business, including contractors, municipalities, public utilities, manufacturers of “difficult products,” chemicals and habitational real estate, may be offered less capacity.

Directors and officers liability coverage is forecast to rise 13.2%, although rates could increase as high as 70% for some classes. Substantial losses and the threat of increasing numbers of lawsuits resulting from COVID-19 are “exacerbating an already difficult market for buyers and underwriters,” Alera said.

Professional liability is expected to increase 11.7%, but this varies based on sectors, account size and individual risks. Insurers are said to be interested in avoiding large and small organizations and are focusing instead on the middle market.

Commercial auto is forecast to rise 14.2% as fleet rates are expected to increase between 10% and 20%, with large fleets facing greater increases, higher deductibles and lower limits.

Cyber liability coverage is projected to rise 10%, but heavily exposed industries should expect to see higher than 10% rate increases. Insurers will be tightening up policy wordings and being cautious about how much capacity they allocate to any single account.

Among the largest increases is umbrella and excess coverage, forecast to increase 16.6% Industrywide. Increases may range between 10% and 150%, “depending upon underwriters’ risk perception” and limits purchased. Capacity is being “significantly” reduced, often to $10 million, and with much higher attachment points. 

In addition,  infectious and communicable disease exclusions will be added to many new and renewal excess and umbrella contracts, the report said.

The broker forecast a challenging year for insurance buyers in 2021.

“The 2021 insurance marketplace promises to be a demanding one for insurance buyers. Few insurance programs will renew ‘as is.’ Most organizations will pay more for insurance. Some will have difficulty getting the terms and desired limits,” Alera said in the report.