P&C Commercial Insurance Market Update – What to Expect in 2021

Posted by John Cofini on Mon, Dec 28, 2020 @ 01:52 PM

commercial-insurance-market-updateWith 2021 right around the corner, it’s time to take stock of current conditions in the commercial P&C marketplace. Here’s a look at the trends impacting the market as we head into the new year.

Brace for More Rate Increases

MarketScout reports that commercial rates increased for every line of coverage and industry class in the third quarter of 2020. The composite rate increase was 6.25%, and the rate increase for commercial property was 7%.

According to Business Insurance, AM Best has a “negative” impact for U.S. commercial lines in 2021, with pricing expected to accelerate.

Business Interruption Troubles Will Continue

Businesses have faced unprecedented business interruption in 2020 as a result of the pandemic and related stay-at-home orders. Although a vaccine has now been approved, some of this disruption is likely to continue into 2021. Currently, business owners and insurers are locked in a legal battle over whether business interruption coverage applies to pandemic-related closures. Insurance Journal reports that insurers are winning most of these cases so far, but there are exceptions.

While business interruption coverage for pandemics is disputed, coverage for fires, hurricanes and other natural disasters is widely available – and these disasters are becoming more of a threat. According to NOAA, as of October 7, 2020, the United States has experienced 16 weather and climate disasters with losses exceeding $1 billion each this year. This makes 2020 the sixth consecutive year with 10 or more billion-dollar events. If this trend continues, we can expect 2021 to be another challenging year.

Cyber Concerns Grow

Ransomware has become an especially pernicious threat. Cybercriminals have developed new tactics, often targeting organizations and sometimes threatening to release data instead of just encrypting it. According to ZDNet, ransomware attacks have increased seven-fold over the last year.

In addition to ransomware, data breaches, business email compromise schemes, malware and other cyber threats are also a significant concern. Cyberattacks will likely pose a growing threat in 2021.

The Commercial Auto Insurance Market Is Hardening

AM Best says that the U.S. commercial automobile insurance segment experienced underwriting losses of $4.0 billion in 2019, which is the worst in 10 years. This is part of an ongoing trend of worsening losses for the market.

One reason for this lies in nuclear verdicts. Juries have been awarding increasingly large sums. In one example reported by Freight Waves, a Florida jury awarded $411 million in a case involving a motorcycle driver and a trucking company.

As we head into 2021, it is likely that the risk of jaw-dropping jury verdicts will continue to impact the U.S. commercial auto insurance market.

How to Get Prepared

Now, more than ever, you need a strong independent agency to help you navigate a tumultuous insurance market. At BNC Insurance, we have dozens of reputable carriers partners in many different industry niches. Our experienced brokers can help you compare the options available and find new ways to control costs.

We encourage you to shore-up your loss prevention protocols and practices now, so your broker has a positive story to present to underwriters. Be sure to review claims regularly to be sure they are not over-reserved or open longer than necessary. We haven’t been through a hard market in several years, but from past experience, we know that affordable coverage can be hard to source, so please be proactive. BNC Insurance is here to help. Contact us to set up a planning review.

Tags: commercial insurance, commercial insurance market