Market Hardening Sharply, Brokers Say

A survey of agents and brokers indicates that insurance becamemore difficult, and in some cases nearly impossible to obtain inthe fourth quarter of 2001, while premium rates rose more sharplythan earlier in the year.

The Washington-based Council of Insurance Agents and Brokersreleased its quarterly Commercial Insurance Market Index last week,reporting that producers are seeing significant premium hikesacross-the-board.

“This is not a crisis situation yet, but the uncertainty andconfusion our members find when trying to place certain lines aresure to contribute to an overall unsettled business environment,”said Ken Crerar, president of CIAB, in a statement. “Its too earlyto tell whether this disruption is a short-term response to thetrauma of Sept. 11 or a more permanent market condition.”

CIAB said producers reported the most difficult underwriting andmost significant rate hikes were in New York City and Washington,D.C., where the terrorist attacks took place on Sept. 11.

Generally, terms and conditions have become tougher anddeductibles are higher, the association said. Terrorism coverage isscarce and clients, in many cases, are going bare because the priceis too high even when insurance is available, CIAB added.

Insurers are also looking for more information about risks,while the underwriting process has moved “from strict to burdensomein many cases,” CIAB said. The association added that some brokersare reporting that insurers want as much as five years of losshistory and extensive financials on potential insureds.

More brokers are turning to alternative markets, CIAB noted, andthere is also an upsurge in business going to the excess andsurplus lines market, especially for umbrella and propertyrisks.

The survey of 140 CIAB members reports that respondents haveseen no decreases in premium rates over last year. Indeed, only 1percent of those surveyed said they saw no change at all inrates.

The surveys report breaks responses down into results forsmall-size firms ($25,000 or less in commissions and fees);medium-size (between $25,000 and $100,000); and large firms (inexcess of $100,000).

Combining the three groups together, and averaging the total, 56percent of respondents said they saw rates go up between 10 and 30percent over last year in the fourth quarter, while 30 percent saidrates rose between 30 and 50 percent. Six percent of therespondents said rates rose between 50 and 100 percent. Less than 1percent said they saw rates more than double.

When asked about seven lines of property-casualty and liabilitybusiness, the response was overwhelming that increases were seenacross-the-board. Only 1 percent of respondents said they saw adecrease, and that was in commercial auto. Otherwise, the majoritysaid they saw rates go up.

Among the individual lines:

Some of the sharpest increases were seen in umbrella coverage,where 13 percent of the respondents said rates were up more than100 percent over last year, while 28 percent said rates were upbetween 50 and 100 percent.

Commercial property was next, with 26 percent saying rates rose50 to 100 percent over last year, and 66 percent reporting rates upbetween 10 and 50 percent. Five percent said rates more thandoubled.

Nineteen percent of respondents said construction coverage costsrose between 50 to 100 percent, while 63 percent said they sawrates up between 10 and 50 percent.

Sixty-five percent saw business interruption increases of 10 to50 percent, while 11 percent reported premium increases of morethan 50 percent.

In group medical, 49 percent reported increases of between 10and 30 percent, while 17 percent said they saw rate hikes ofbetween 30 and 50 percent. Only 2 percent said rates were upbetween 50 and 100 percent, and none reported increases of morethan 100 percent.

A complete chart of the survey results is available at www.ciab.com.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 21, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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