Research conducted by commercial insurance placement and disputes firm, Mactavish, reveals that many commercial policyholders have faced drastic premium increases this year, as insurers look to improve margins in a hardening market, where some have risen up to 800%.
Analysts from the firm also highlight the increase in cyber crime, which has risen due to the pandemic and subsequent surge in remote working.
As insurers look to protect their reserves and minimise claims payments, Mactavish says it has also seen considerable erosion in the quality and extent of the insurance cover offered to policyholders.
Due to unclear Terms & Conditions that haven’t being flagged by either insurers or brokers, policyholders may not be aware of their increased exposure.
Market surveys are showing 34% increases in premiums across the board, however this hides a much more complex picture as lines such as Crime, Professional Indemnity, Pension Trustees’ Liability and Directors’ and Officers’ insurance have risen far in excess of this.
In addition, some industries have suffered much more than others. Analysts note how the construction, energy, food and beverage, travel, manufacturing and waste sectors will be experiencing particularly challenging renewals.
Mactavish is expecting rates to continue to rise in 2021 and says that some companies will be unable to pay for their cover. If it continues this could force them to reduce operations, lay-off employees or even go into administration.
Bruce Hepburn, CEO, Mactavish said: “For years, the insurance industry has sold its cover on the basis of price as opposed to quality and this has pushed premiums down, when in many cases they should have been higher. The insurance market is hardening now, and premiums are rising dramatically as insurers seek to make up lost ground quickly.
“The timing couldn’t be worse for firms that are still being battered by the economic fall-out from the pandemic. For some businesses, these unexpected cost increases could be the final nail in the coffin.”
“Aside from playing a role in pushing price increases, COVID-19 has also exacerbated many risk areas. As just one example, there has been a marked increase in cyber-crime as employees moved to home-based working. This creates a double whammy effect where policyholders need to buy more insurance at precisely the moment that prices are spiking.”