Market Forecast

Broker Forecasts Mixed Pricing Bag

Environmental, property and primary auto liability are some lines expected to see hikes.
By: | March 5, 2018 • 4 min read

Brokerage USI Insurance Services, which made headlines in December by merging with Wells Fargo Insurance, released a market forecast for 2018 that predicts a mixed bag in commercial insurance pricing. Out of 29 lines that the broker analyzed, nine of them could be in line for flat to increased pricing, according to the brokerage.

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Lines where insureds can expect significantly higher pricing include commercial construction project risk, which USI said could see premium price hikes of between 5 percent and 10 percent. Primary auto liability, which many predict will be an ongoing pain point, could also see increases between 5 percent and 10 percent.

Other lines expected to see increases are environmental (combined general liability), fiduciary liability, employment practices liability and medical malpractice, according to USI.

But the areas with the highest chance of increases are property and CAT property, which USI pegged at flat to 15 percent and 5 percent to 20 percent, respectively.

“Accounts with hurricane-related exposures and losses will almost undoubtedly face renewal situations with increased pricing, potentially less broad terms, and perhaps less available capacity,” according to the report, which was put together with the help of 17 USI executives.

The biggest question the USI report poses is whether the massive hurricane losses in the third quarter of 2017 will lead to a “regional or localized event versus an industry-wide event as it relates to pricing.”

Doug O’Brien, national casualty and alternative risk practice leader, USI Insurance Services

Owners of truck and auto fleets can still achieve favorable pricing, according to USI, if they deploy telematics to guard against the threats of fatigued and distracted driving.

The brokerage also said establishing longer-term relationships with underwriters should help ward off the price increases many industry players are predicting for this line.

One of the bright spots in the market is workers’ compensation, according to USI’s research. That line is being positively impacted, at least from the insurance buyer’s perspective, by ample capacity and in general, stronger risk mitigation measures being taken by clients.

The use of analytics, as in many other lines, not only holds promise but is also achieving results, according to the USI authors.

“Analytics relative to past and future loss data are becoming an absolute necessity to intelligently negotiate optimal pricing, program design and collateral,” USI detailed in the report.

“Predictive modeling has become a key underwriting tool for pricing and post-loss mitigation.”

Anecdotal evidence is that carriers are displaying a keen interest in international coverage, and that was also reflected in the USI findings.

“We have seen some carriers that historically did not participate on controlled master programs or in the international marketplace enhance their product offerings and aggressively price new business,” USI found.

“This has resulted in rates being reduced by as much as 15 percent at renewal,” the USI authors said.

In addition to workers’ compensation and international programs, lines expected to see continued price erosion include environmental (contractors’ pollution) — down up to 10 percent; public company directors’ and officers’ liability — pegged for a 5 percent to 10 percent decrease; reps and warranties — down 5 percent to 10 percent; and cyber, which despite concerns that many underwriters still don’t adequately understand the risk, could see price decreases in the 5 percent to 10 percent range, according to USI.

One area that drew extended commentary from USI was environmental. Describing the market as significantly mature, the USI writers noted that despite AIG’s announced departure from pollution legal liability coverage in 2016, other carriers were willing to assume the more than $1 billion in expiring AIG premiums.

“We have seen some carriers that historically did not participate on controlled master programs or in the international marketplace enhance their product offerings and aggressively price new business. This has resulted in rates being reduced by as much as 15 percent at renewal.” — USI Insurance Services, 2018 Insurance Market Outlook

The USI authors expect the environmental market to significantly outpace the overall commercial property/casualty market going forward.

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They estimate the market as being at more than $2 billion in premiums currently and in line for double-digit growth.

But then they add this caveat:

“If, after 30 years of actuarial data, AIG couldn’t be profitable in this space, what carrier might be next and, more importantly, when will the ‘musical chairs’ stop and rates start to rise?”

Adding to the uncertainty for this line, despite the capacity pouring into it, is the massive hurricane damage of 2017 and the possible environmental damage resulting from it.

“Frequency and severity of environmental claims are expected to continue in 2018,” USI said.

“With significant hurricane and flooding in 2017, toxic release and mold claims are still being adjusted, but these don’t seem to have much bearing on future coverage or rates, except that underwriters will examine more closely those risks with exposure to coastlines or flooding.”

The entire USI report is available online. &

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]