Is rate relief on the way for middle market businesses?

Running a commercial insurance site can be a daunting task for middle-market businesses. While some lines of insurance have been in a “tough” market, others have been more stable.

Brokerage Hub International Group reported an average increase of 6.9% in commercial insurance rates for middle market businesses in the third quarter of this year, expecting rates to remain stable or moderate through the end of the year.

However, it noted large differences in rates for certain lines, such as commercial vehicles, general liability, property, excess/umbrella, workers’ comp and D&O, and for customers with risks that complex.

Michael Chapman (pictured right), national director of commercial markets and president of the Hub’s southern and central regions, spoke to Insurance Business about the key factors driving these changes and the strategies businesses are taking I can use them to control them.

“The concept of using an average is difficult given the range of business models in our study,” said Chapman. “If you see prices flat or slightly higher, it may mean that they were too high in previous surveys. Only a few lines have decreased, and even those that have decreased are decreasing. We are still seeing increases, but the speed and size are greatly reduced.

“Before, we were in two tiers for property, auto, general liability, and excess risk. Now, it’s a huge market shift, partly due to dealer performance and earnings. is better.”

Which insurance calls remain the same depending on the situation?

According to Chapman, the most important areas of concern are general liability and commercial vehicle insurance. These calls still have a high rate of increase, especially driven by external factors. In the case of general liability, the main driver is the increase in litigation.

“Overall, we’re back to fully open courts, and caseloads are back to pre-2020 levels,” he said. “Now it’s a litigious world, and the sizes and sentences of the sentences are increasing.”

The increase in large judgments has forced insurers to reduce their capacity, leading to more risks in an oversupplied market. “Instead of providing $100 million limits on excess umbrellas, [carriers] it could offer $10 million and the right price,” Chapman said.

Commercial auto insurance faces a variety of challenges. Contrary to what was expected, technological progress has not reduced the risks. Distracted driving due to cell phones and the proliferation of delivery vehicles, which Chapman called the “Amazon effect,” add to the problem.

The cost of applications is also rising due to the need for complex components. “I had a minor problem that would have cost $150 twenty years ago, but now it’s $4,000 because of all the technology in the car,” Chapman said.

Risks and critical management applications for positive development

While some lines such as general and auto loans are rising, others are flat or declining. For example, workers’ compensation is highly regulated, and changes in standards in this area are small.

Similarly, the directors and officers (D&O) insurance market for publicly traded companies, which has seen significant growth in recent years, has declined.

“The market for public company D&O just went up and up until 2022, and then at the end of 2022 and all of 2023, the market tanked,” Chapman said. After this drastic adjustment, he said, rates have decreased.

As rates continue to fluctuate in different directions, middle market businesses find themselves at a crossroads, needing to adjust their strategies to deal with rising costs. Chapman emphasized the importance of risk management and active claims management to position businesses for better insurance development.

Businesses that can demonstrate that they are low-risk customers are in a better position to secure good deals. Companies that proactively manage their risks and show a willingness to change discounts or limits are likely to see better results.

“I think the million dollar question for marketers is what value do we bring beyond just placing a business?” said Chapman, “That’s why we’re doing these rate perspective reports and discussing market trends—so that we can go to our clients and say, how do we make you less vulnerable? “

The key to becoming a low-risk customer lies in three key strategies: driving a culture focused on risk management, managing claims effectively, and flexibility and security architecture.

“How determined they are [clients] driving a culture focused on risk management [in their organization]?” Chapman said.

What should middle market buyers know before the renewal season?

Supply chain risk is another area where businesses need to focus their attention. Reports of business interruption are increasing as the time it takes to get new parts or machinery is increasing dramatically. Companies need to be aware of these risks and take steps to diversify their supply chains, to ensure that they are not dependent on a single supplier for critical components.

In addition to these internal strategies, middle market buyers also need to be aware of broader market factors that influence insurance premiums. Chapman spoke of uncertainty in the reinsurance market, where carriers are becoming more selective about the risks they take.

Chapman said: “You’re not going to see huge margins in single-carrier accidents or large-scale fleet response.” “Underwriting is very high now, and they want to assure customers of solid risk management.”

Are you a retailer serving the middle market? What are your thoughts on this view? Please share your thoughts below.