What to Look for in Commercial Insurance Market Conditions in 2020

According to a recent analysis from broker USI Insurance Services, ongoing rate rises and capacity cutbacks are taking shape in most property/casualty business lines in the fourth quarter—and for some, will continue into the new year.

Only one line—loss sensitive workers’ compensation accounts—showed lower fourth-quarter rate estimates compared to midyear, while seven others remained unchanged.

According to USI’s Q4 2019-2020 P&C Insurance Market Outlook Report, which examines 28 different product lines as well as forecasts from a prior midyear update compared to observations of fourth-quarter pricing, the other 20 lines, including all property lines, general liability, umbrella, and cyber, had indications of higher rate changes for the fourth quarter than at midyear.


Among the other findings in the report:

Wildfire is no longer an afterthought in the property insurance market.

AIG, FM Global, and Lloyd’s of London, three industry leaders, are closely analysing their North American property business, which affects capacity, prices, and coverage.

In casualty insurance, the bulk of coverage lines are firming because capital is being spent considerably more conservatively and carefully, rather than due to capacity restrictions.

Unlike commercial car liability, which has been firming for three or four years, the market for primary general/products liability and umbrella/excess liability firmed swiftly beginning in the fourth quarter of 2018. Prior rate increases were short-lived, but the current climate of more stringent risk selection, tighter underwriting standards, and lower competition is proving to be far more consistent, persistent, and severe than anticipated.

Markets are increasingly hesitant to offer primary liability lines without workers compensation, particularly for bigger accounts.

Deteriorating casualty loss patterns, typified by an increase in the frequency of severe losses, have prompted markets to quit some lines, limit capacity, and significantly raise premiums. These activities affect all industries and classifications, independent of market tenure or loss history.

The demand for casualty rate hikes is not projected to reduce significantly throughout 2019 and into the third- or fourth-quarter of 2020.

USI has observed an average lead umbrella capacity drop of $25 million to $15 million or less, with no matching decrease in rates and capacity reallocation higher up in towers.

Excess markets are fleeing what they perceive to be below-market price; fresh market capacity is not entering.

In the public directors and officers liability (D&O) market, USI said it has seen more rate increases in the first three quarters of 2019 than it has in the previous 16 years. According to the research, “we have definitely now shifted into a carrier-dictated market.”

The flat-to-ten percent rate change suggestions indicated on the chart above are not the norm for large corporations or key targets in cyber. USI has seen premium increases of up to 20% and SIR increases of up to 50% for insureds with over $1 billion in revenue and those in “challenging classes” such as retail, hospitality, health care, and financial institutions, and the broker expects this to continue for the rest of this year and into the first half of 2020.

The ABI makes a statement about the Coronavirus and business insurance.

In light of the recent developments with Coronavirus, an ABI spokeswoman stated:

“Commercial insurance policies cover a wide range of hazards and can be adapted to the needs of specific businesses, including coverage extensions.” Businesses who are concerned about the effects of Covid-19 should review their insurance coverage and consult with their insurance counsel or broker.

A small percentage of businesses may have insurance in place that explicitly covers business interruption caused by notifiable diseases. This form of extension, however, is not frequently included as a standard. Standard company insurance policies are intended and structured to handle standard risks and are so unlikely to cover the effects of worldwide pandemics such as Covid-19.”…

Cover intends to make it simple for businesses to obtain commercial insurance.

If a coffee enthusiast decides to build a coffee shop somewhere, chances are they’ll end up Googling “liability insurance” and attempting to traverse the complex legal web to get all of that nailed down before they even sell their first iced latte.

Instead, Inaki Berenguer hopes they’ll come across CoverWallet in their Google search, which simplifies the process of setting up commercial insurance for a small business. The company is now attempting to take another step forward by stating that it will develop an open-ended tool that will allow third parties to plug directly into its services, allowing small businesses to obtain commercial insurance while going through the flow of another set of SMB management software. All of this is done to ensure that more and more users can begin using the service, allowing it to gain new business — and data — even if it means handing off some of the branding and user experience to another firm.

“[When I launched my last company] and we came to New York with three people, we were advised that if you want to sign a lease, you have to acquire insurance.” Berenguer explained. “I wanted to go to a website, input my square footage and revenue, get a quotation, and complete everything else in five to ten minutes — but I was informed that wasn’t possible for business insurance.” I had to go to a general provider, fill out a 20-page PDF, which the broker then sends to the insurance company, and they’d get back to me with a price. This is an analogue, time-consuming, and obtuse technique. I’m aware that this procedure can be reimagined. There are 25 million small enterprises in the United States, and they all require insurance.”


CoverWallet is similar to what Berenguer described in his dream scenario when he was relocating his previous company into an office. The insurance policies are tailored to the needs of restaurants, startups, retail establishments, contractors, and a variety of other commercial insurance products. Users enter their business details, then pay for the plans — either up front or in monthly instalments — and have their policy set up in no time. If that doesn’t work, CoverWallet has a team of agents to help with the remainder of their inquiries, and users can change any of their policies at any time.

But, in the end, it’s possible that users want to keep things simple – especially if they’re a small- to medium-sized firm that isn’t the kind of technically adept one that you’d find in a major metropolitan region like New York or San Francisco. While CoverWallet seeks to simplify the entire process of obtaining commercial insurance, which can be a major impediment to getting something as simple as a coffee shop off the ground, integrating into other tools and making the entire process more and more seamless ensures that it will be able to keep that flow of businesses coming in — and those businesses may eventually start spreading the word on their own.

“Some companies may already be using accounting software or payroll,” Berenguer explained. “Those systems include all of the company’s information.” Why should they come to a platform and input everything when the information is available elsewhere? It’s the same as white labelling your solution. However, if you want to be customer-focused, the less they have to type, the better.”

There isn’t much stopping the larger insurance companies from providing a similar type of plug-and-play API. However, Berenguer believes that aggregating all of those insurance providers and then providing that pipeline to customers as they look to pick up insurance through another SMB tool like Gusto (though Gusto isn’t one of the clients) provides a compelling enough argument for those employment suites to bring them in. Certain providers may only offer certain types of plans or cover specific geographic locations, and CoverWallet intends to make a strong enough argument to fill all of those gaps.…