COVID-19 and Continued Market Hardening Put Stress on P/C Market in Q1 2020, According to CIAB Market Survey

WASHINGTON, May 27 -- The Council of Insurance Agents and Brokers issued the following news release:

The market continued to harden in Q1 2020, according to The Council of Insurance Agents & Brokers' quarterly Commercial Property/Casualty Market Survey. Respondents reported moderate to significant premium pricing increases for all account sizes and all lines of business except for Workers' Compensation. Premium prices across all-sized accounts increased by an average of 9.6% in Q1 2020, compared to an average increase of 7.5% in Q4 2019. This marks the 10th consecutive quarter of increased premium pricing by account size.

The hardening in Q1 2020 mostly impacted large accounts, whose premium prices increased by an average of 12.6%, followed by medium accounts with an average premium increase of 9.8%. Small accounts were impacted less than the other account sizes, with an average premium increase of 5.5%.

Commercial lines also experienced moderate to significant hardening in Q1 2020, with an average price increase of 8.7%, compared to 7.6% in Q4 2019. Umbrella pricing increased the most this quarter, up 17.3%, followed by Commercial Property at 12.0%. Commercial Auto prices also continued their climb upward with the 35th consecutive quarter of increases, at an average of 9.6%.

"We are now in the midst of a hard market, premium increased steadily for 10 consecutive quarters," said Ken A. Crerar, President/CEO of The Council. "Umbrella, Commercial Property and Commercial Auto were the hardest hit, with Umbrella and Commercial Property seeing double digit increases--the largest since 9/11. Additionally, the uncertainty around COVID-19 put additional strain on the industry in the latter-half of March. Respondents noted the current pandemic affected carriers' ability to collect premium and the availability of coverage by the end of Q1."

Though respondents noted that COVID-19 only really began to impact the industry in the latter half of March, those effects were pronounced. Business Interruption (BI), a line that has received national (and international) attention during the pandemic, saw what seems to be a significant shift in demand and claim activity. The percentage of respondents reporting an increase in demand for BI rose from 18% in Q4 2019 to 47% in Q1 2020, while the percentage of respondents reporting an increase in claims for BI jumped from 18% in Q4 2019, to 75% in Q1 2020. It is important to note that an increase in number of claims does not assume these claims were accepted, particularly those related to COVID-19.

Respondents reported increased scrutiny from underwriters for medium and large accounts. Carriers were "scrutinizing loss records, including low-severity losses" and putting more focus on "loss history, especially the cause of loss," and respondents agreed that carriers continued to increase their analytics capabilities for underwriting purposes.

Underwriting for specific lines of business also saw similar changes. Underwriting capacity decreased for lines including Umbrella, Commercial Property, Commercial Auto, and D&O, all of which experienced significant premium increases. Umbrella limits were cut in half or reduced even further, and carriers sought higher attachment points for Umbrella policies with underlying Commercial Auto and General Liability risks, linking to respondent perception that Auto and Liability claims were piercing Umbrella limits more frequently in recent quarters. Commercial Property rates increased and carriers pushed for higher deductibles as well as adding "catastrophe deductibles--Quake, Flood, Wind" on top of the traditional property insurance deductible.

This quarter, in the efforts of establishing a baseline for future surveys, respondents were asked a number of questions related to COVID-19 and how the current pandemic impacted commercial lines in Q1. It was clear that brokers began to see COVID's impact in the second half of March, and it's important to note this survey was fielded from April 1 - May 1. Despite it being "too early to tell" regarding the pandemic's true impact on the industry, brokers had a lot to say.

Click here for the Q1 2020 P/C Market Report (https://www.ciab.com/download/24523/).

Click here for the Q1 2020 COVID-19 Supplement (https://www.ciab.com/download/24525/).