A child shocked about property casualty insurance
Property Casualty

A Different Kind of Temperature Check

Erin Osier
Erin Osier
Vice President, Enterprise Placement, PC

From politics and the environment to hardening insurance markets and disruptions due to COVID-19 and social injustice — today’s events are causing us all to have tough conversations. To serve our staff and clients in the best manner possible, we need to have the courage to explain the situation, look for solutions, analyze the options, and provide recommendations. It’s not always easy, but at Holmes Murphy we try to care personally and challenge directly.

Temperature checks are becoming more normal in our day-to-day lives, but temperature checks are not new to the insurance industry. As brokers, we are often checking the marketplace. Having our fingers on the pulse of the market to monitor rate, capacity, underwriting appetites changes, financial stability of insurance carriers, service capabilities, and many more factors help us take a temperature of the market and prepare our clients for any changes. The market has been changing from a soft market to a hard market.

Property Casualty Markets Are Hardening

The property casualty insurance industry experiences cycles — hard markets and soft markets. In soft market times, excess capacity exists, markets compete to grow market share, and rates decline.

It’s the opposite for hard markets. Capacity shrinks, insurance carriers focus on profitability, and rates increase. This hardening of the market is happening with Auto, Property, and Excess Liability taking the brunt of it.

Why Is This Happening?

The jump in pricing has been driven by prior years’ losses and a shortage of capacity due to the following:

  • Continued frequency and severity of auto accidents
  • Carrier and reinsurance retreats for the marketplace
  • Social inflation
  • Climate disasters (there were 14 separate billion-dollar weather and climate disasters in 2019 alone)
  • Low bond investment returns

How Does This Impact Your Property Casualty Insurance?

With this property casualty insurance hard market, you’ll see:

  • An increase in reinsurance pricing passed down to carriers
  • Capacity shrinking (less coverage available, higher demand = rate pressure)
  • Rate changes increasing

You will see carriers working on book “remediation,” which creates pockets of property business that are tougher to place. Admitted markets are continuing to move away from wildfire risks, convection storm areas, flood, or other catastrophic exposures, and tougher classes of fire business.

What Options Exist for Property Casualty Insurance?

Minimizing the impact of premium increases can be done in a variety of ways. Each solution is as unique as each of our clients. Some solutions include:

Increasing your deductible. Taking on more risk yourself eases the burden of the carrier, and often rates are lower because of it.

Focusing on safety and loss control. Review your risk management practices to help prevent a claim from occurring in the first place (and minimizing the size of the claim if it does happen).

Brag to your insurance broker. Have you installed sprinklers or security systems? Are you now subcontracting some aspects of your work that in the past were riskier? Have you beefed up your IT and network security? Share with us and your insurance carriers all the wonderful things your company is doing with respect to claims and loss control, making you a safer risk.

Coronavirus Impact

According to the CDC, COVID-19 is an outbreak of respiratory disease caused by a novel (new) coronavirus that was first detected in China and has now been detected in more than 200 countries and territories.

COVID-19 has impacted all of our lives. It’s ultimate impact on the insurance industry is yet to be determined. Early on in the pandemic, business interruption coverage was at the forefront of the conversation, but coverage is rare as most property policies require direct physical damage to the location in order to trigger coverage plus virus and bacteria is commonly excluded. Outside of this specific coverage issue, there are still implications of COVID-19 on businesses today.

Right now, there are a lot of questions resulting in tough conversations, such as:

  • Can I defer payments on my insurance premiums?
  • Am I able to decrease my policy exposures midterm (sales, payroll, fleet, etc.)?
  • Can my business continue operating if staff works remotely?
  • What if my employees get sick with the virus?
  • Should we put rules on travel?
  • Can my business continue operating if staff works remotely?
  • When and how should we re-open our business?

The easiest way to protect yourself and your employees is to stay informed. Check on the latest updates from the CDC, WHO, and other local regulators. We also have a COVID-19 Resource Center (updated daily) that may be beneficial.

Also, double-check: do you have a business continuity plan? If not, consider putting one in place. Reach out to us if you need help!

When It Comes Down to It, Hold the Tough Conversations

Deal with the present, but look to the future. Rest assured Holmes Murphy will continue to keep our eye on the market and be prepared to react. Resist the temptation to become engrossed in fear and frustrations. Let’s take our temperatures, wear our masks, and support one another.

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