What to Expect from Commercial Insurance Markets in 2021
Posted by Miller Hanover Insurance Agency on
2021 has brought with it significant changes that directly affect the commercial insurance market. Whether you are looking for a reliable insurance agency or simply keeping up with the times, familiarizing yourself with new market conditions is essential. Here are some of the most prominent trends affecting the commercial insurance marketplace this year.
Growing Cyber Concerns
Cybercriminals do not seem to be relenting any time soon. New ransomware and malicious tactics have been developed to target organizations. Some have even been seen to release vital data instead of encrypting it, as was expected in the past.
It is estimated that ransomware attacks have increased more than five times since last year. Other cyber concerns giving insurance agencies sleepless nights are malware, schemes to compromise business emails, and data breaches.
As such, you can expect a rise in cyber threat concerns and, hopefully, more reliable measures to protect agencies from such attacks.
Commercial Rate Increases
Last year, the commercial insurance rates increased for each line of coverage and industry sector. Composite rates were estimated to have increased by more than 6%, while commercial property rates increased by at least 7%. AM Best, a US credit rating company, has spelled doom for the commercial marketplace this year, with prices expected to accelerate even further.
The pandemic caused massive business disruption in 2020 with orders to stay at home and reduce physical interaction. 2021 has come with vaccines and slight but significant business resumption. However, this does not mean that the commercial scene is operating as it was before 2020.
There have been disputes regarding business interruption coverage, but natural disasters and fires are still ongoing. Natural disasters are growing as a threat to the commercial insurance market, with cases rising every day.
The National Oceanic and Atmospheric Administration (NOAA) reported that last year, the US experienced more than 15 climate and weather disasters. These alone were estimated to have caused more than $1 billion in losses.
There were similar losses related to natural disasters in the last five consecutive years, making this a trend you should be worried about. If it persists, you can expect to see more of the same in 2021.
A Toughening Commercial Auto Insurance Market
2019 saw the automobile insurance scene in America experience losses of approximately $4 billion, the worst we have seen in over a decade. This has been a significant contributor to the losses we have witnessed in the commercial insurance market lately.
The auto insurance commercial market has been hard hit by the increasing number of central verdicts issued in the recent past. Courts seem to be awarding exorbitantly large amounts, making it even harder for the auto market to prosper.
If these unexpected jury verdicts persist in 2021, we fear the US commercial automobile insurance market will continue to suffer losses.
Competitive Workers Compensation
Base rates for workers’ compensation are expected to stagnate or decrease in 2021. However, it is essential to note that each insurance company usually files base rates in their specific states. This means that increases and declines may be witnessed in different classifications.
Time will tell how long workers’ compensation will remain aggressive. The decline in base rates has been a significant trend since 2014, with some states experiencing drops of a whooping 40%.
This has spelled reduced profitability in this sector since combined ratios, expenses, and losses are still rising. We foresee consistent base rates in 2021’s first half followed by a likely increase later in the year or early next year.
Stressed Surety Bonds
Contractors undertaking public projects or large private ones are required to have surety bonds. The underwriting guidelines for surety bonds were laid-back in 2020 owing to the long innovative period at the beginning of the year. This brought about a significant increase in credit, with many surety companies entering the bonding market.
The economic uncertainty witnessed in 2020 has poured into the new year with the construction and surety scenes experiencing tough times. This calls for keener financial management and specialized help to try and secure more conducive terms.
Aggressive Health Insurance
2020 saw an increase of about 4% on average with regards to health insurance. The postponement of non-essential healthcare due to the pandemic led to a decline in overall annual claims. Since this care has been resumed in 2021, we expect to see a rise in claims costs. We cannot dismiss the Affordable Care Act (ACA) effects and the 2020 election on the health insurance scene either.
Expect to see a low but steady increase in rates this year with few health insurance plan modifications. Employers who have less than a hundred eligible employees will have their rates determined by the following factors:
Ages of the employees and their dependents
Their health plan design
Rates for companies with more employees are deemed to rise between 5% and 10%. We can also expect ACA- compliant plan changes in the new year.
Insurance carriers can remain on top of their game in 2021 by offering attractive rates. But with fewer providers and a limited choice of physicians. Companies that offer their employees vision, disability, life, or dental insurance plan improve employee morale and retain talented workers. So do companies that offer supplemental plans for cancer, accidents, and much more.
How to Prepare for the Turbulent Market
During such tumultuous times, the best course of action is to seek the services of an independent and reliable insurance agency. This will help you navigate unforeseen difficulties in the market. We have professional and highly experienced partners in every insurance industry niche. Our qualified brokers are dedicated to helping you assess your options so you can best manage your costs.
The market cycle can be said to be extremely tough on commercial insurance at the moment. With the decrease in capacity, strict terms, and higher rates, insurance costs seem to be going higher and higher. However, aligning yourself with a reputable insurance agency can help you navigate the market and make worthwhile decisions. Visit https://www.millerhanover.com/ to learn more about how best to manage your industry niche and company insurance expenses.
Miller Hanover Insurance
334 High St Hanover PA 17331