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Rising inflation, if unabated, will push up loss costs and ultimately have to be passed on through premium increases, Arthur J. Gallagher & Co said in a report released Tuesday.
While market conditions have begun to stabilize, the complicating factors of social inflation, storm losses and general inflation continue to impact the overall insurance market, Gallagher said in its Spring/Summer Insurance Market Report.
With the rise in inflation, claim costs in several lines of coverage including commercial auto and property are increasing and will also likely become more expensive in general liability, Gallagher said.
Social inflation – the trend of rising insurance costs due to increased litigation, plaintiff-friendly judgments and so-called “nuclear” jury awards – also shows no signs of slowing, and litigation funding is an added concern for insurers, Gallagher said.
Overall, rate increases have decelerated slightly and are expected to continue to moderate in many lines throughout 2022, according to the report.
Gallagher’s U.S. clients saw an average price increase (rate plus exposure) of 8% across all lines in the first quarter, the Rolling Meadows, Illinois-based brokerage said in the report.
Cyber continued to be the exception, with a first-quarter median increase of 37%, and 88.4% of U.S. clients seeing an increase. Cyber premiums increased across the board, regardless of industry sector or organization size, Gallagher said.
Workers compensation rates showed relatively flat pricing, with a median increase of a mere 0.6%.