Rates Are Going Up; See What Else Is in Store for the 2019 Commercial Insurance Market

The property market was in the hot seat coming out of 2017 and into 2018. But it's the commercial insurance market that saw a 'stealthy' firming.
By: | November 30, 2018 • 3 min read

The property market was in the hot seat coming out of 2017 and into 2018.

Advertisement




Following a year of catastrophic hurricanes, devastating fires and other natural disasters, the industry was watching to see how the market would react. After all, there had been a few quiet years prior to 2017, with little major natural catastrophes to note.

While the focus was on property, the commercial insurance market overall underwent a “stealth” firming, reported Willis Towers Watson (WTW).

In that report, “Insurance Marketplace Realities 2019,” WTW noted two trends impacting this firming: “The first is a relatively modest but definite rise in rates across most liability lines of insurance in response to relentless loss activity, which, given all the worry over property rates, seemed to sneak up on us. The second trend is a resurgence of mergers and acquisitions among insurers, and particularly ‘mega deals’ (i.e., deals exceeding $1 billion).”

Liability Line Rates Likely to Increase

WTW predicts that 14 commercial lines are expected to see rate increases in 2019, including casualty, with a likely 4 percent increase.

Some other key price predictions for 2019 include:

  • Auto — +6 percent to +12 percent
  • D&O — Flat to +5 percent
  • E&O — Flat to +5 percent
  • Energy — Flat to +10 percent
  • Environmental — Flat to +15 percent
  • Political risk — Flat to +5 percent
  • Trade Credit — Flat to +5 percent

“Elsewhere in the casualty market,” said the report, “pricing for general liability, umbrella and excess liability coverage is expected to rise in the low- to mid-single digits as the market is hit by significant catastrophic liability stemming from a range of hazards, including California wildfires, the opioid epidemic, #MeToo litigation and relaxed standards for class action certification.”

International casualty and workers’ compensation, however, are likely to expect rate decreases in the upcoming year, said the report. International could see a 5 to 10 percent decrease, and workers’ comp could be looking at a 4 percent decrease.

The WTW report identified three main areas as to why workers’ comp can expect rate decreases. First, employment increases are being reported across all sectors in the U.S., and in total, the country has seen a 1.8 percent increase in employment over the last two years.

Second, medical care improvements and return-to-work programs have led to a decrease in lost-time claims. Finally, telemedicine should provide quicker, more efficient workers’ comp care, from providing access to high-quality medical care to mitigating medical expenses and lost time from work.

A Trend of Mergers & Acquisitions

The report also identified the upward trend of billion-plus dollar mergers and acquisitions as a contributing factor: “In the largest sense, the news is good. For the most part, insurer M&A … has not had a materially negative impact on capacity or pricing,” WTW wrote.

Advertisement




Altogether, there were 6 primary reasons why there are more M&As happening now:

  1. Organic growth was hamstrung by the CATs of the last two years. Because of this, the most “natural” place of growth comes from synergies between companies.
  2. A slight uptick in rates following 2017’s mega losses, relatively lighter losses in 2018 and good performance of investment portfolios have pushed policy holder surplus to record highs.
  3. The changing U.S. tax structure made U.S.-based companies more attractive to overseas buyers.
  4. In the same vein, overseas buyers are starting to seek revenue outside their domestic markets.
  5. Rising interest rates make insurance companies attractive targets, as that capital can earn higher returns and improve overall return on equity.
  6. Technology and Insurtech are driving innovation.

WTW also noted that another driver for M&A is that these consolidated insurers bring a broader product offering on a greater geographic scale to the market. This, said the report, could prove a tactical and even strategic trend for insurers in 2019.

With all this in mind, however, WTW believes recent M&As will not have a material impact on rates and capacity, but will instead continue to reduce the number of competitors in the field.

“Given the capital fluidity that is the industry’s ‘new normal,’ we don’t foresee a dramatic impact on rates, but we do expect that consolidations will result in more underwriting discipline, which may serve as a backstop against another free fall in rates,” it said.

Read the full report here. &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

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.

Advertisement




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.

Advertisement




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]