The Council of Insurance Agents & Brokers (CIAB) has noted that the rapid increase in premiums seen in late 2020 and early 2021 continued to ease off in Q2 2022, with respondents to its market survey reporting an average increase in premiums across all account sizes of 7.1%.
Nevertheless, the firm said that this still marked the 19th consecutive quarter of rising premiums. It went on to say that it saw a similar picture when looking at differing lines of business.
It wrote: “Signs of pricing moderation emerged for some lines of business, like flood, medical malpractice, and surety bonds, while others, like cyber and umbrella, continued to experience upward pressure on premiums, though not as pronounced as in past quarters. Workers compensation premiums also continued to decrease in Q2 2022, at an average of -1.2%, making workers comp the only line with a decrease.”
The authors added: “Commercial property and commercial auto were the lines most affected by recent inflationary trends, according to respondents. Property values, building material costs, and the cost of auto parts, among other things, were all impacted by inflation, in turn driving up premiums for commercial property and commercial auto as carriers had to adjust for the increased costs. Inflation also pushed up claims costs due to higher loss costs and administrative costs for filing claims. These factors exerted upward pressure on pricing—for commercial auto and commercial property especially. Despite the challenges in certain lines, some respondents emphasized that the difficult economy was an opportunity for brokers to demonstrate their value as a trusted advisor.”
The CIAB said that while there has been some relief in cyber pricing, with an increase of 26.8% in Q2 2022 after 27.5% in Q1 and 34.3% in Q4 2021, the line remained a struggle for brokers.
It added: “Issues seen in Q1 continued in Q2, with respondents mentioning tightening limits, capacity issues, and higher deductibles. Respondents also said that though underwriters were a little more lenient when it came to some other lines, they were ‘still requiring extensive risk management controls’ for cyber insurance and asking ‘lots of additional underwriting questions’.”
Within the report, the CIAB said that respondents reported recent inflationary pressures had had a negative effect on the market, particularly in the commercial auto and property lines of business. It said that respondents had reported inflation driving up property valuations alongside the cost of building materials and auto parts.
It wrote: “As we move into the middle of 2022, it’s clear that the U.S. is struggling with inflation. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI), which tracks common consumer items like food, energy, and so on, rose by 9.1% over the past 12 months, the largest increase in inflation since the 12-month period ending November 1981. And consumers weren’t the only one feeling the squeeze—the impact of inflation was also felt by the insurance industry, in particular when it came to the commercial property and commercial auto lines of business, according to respondents.”
It added: “Respondents pointed to inflation increasing property valuations, a trend discussed in the Q1 2022 report, as one of the main impacts on commercial property. ‘The impact of inflation on building values and costs had underwriting impact on insuring values,’ said one respondent from a midsized Northeastern firm. Said another respondent from a large Southeastern firm, ‘Inflation is driving the carriers to ask for increases in building valuations in the second quarter of 2022. Often carriers wanted value increases and rate increases on property.’”
It was also found that inflation was impacting on commercial auto. It said that the impact came from the increase in the cost of most goods.
The CIAB wrote: “As an example, ‘With the cost of auto parts increasing, carriers kept prices firm on the auto line,’ said one respondent from a large Midwestern firm, who also mentioned that in general ‘carriers were also updating replacement cost values on commercial policies.’ Other respondents echoed similar things, saying that inflation was pushing up loss costs and administrative costs for filing claims, and therefore claims costs, which was in turn exerting upward pressure on pricing—for commercial auto and commercial property especially, but also for most lines.”
