As you’ll see in our latest update, the business insurance industry—like many industries—is under a lot of pressure, thanks at least in part to the pandemic. For insureds, the key takeaway is to do everything possible to reduce and control risk, and to strengthen their risk profile.
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CAT Exposures and COVID-19 Create Perfect Storm for Battered Property Market
One of the most active hurricane seasons on record. One of the worst wildfire seasons on record. Oh, and a pandemic that’s leaving many properties unoccupied, is making it difficult for insurers to perform inspections, and is challenging the ability of companies to use capital for risk improvement. Add it up and here is the result:
• Underwriters continue to adjust their books to bolster profitability.
• Accounts with poor loss history, regardless of exposure to CAT, will see rate increases.
• Accounts with CAT-exposed property and a good loss history also can expect rate increases.
• Accounts that have not addressed critical loss control recommendations will see rate increases.
• Underwriters are carefully evaluating all terms and conditions within policies due to COVID-19.
• Up-to-date loss control reports and engineering reviews are becoming compulsory.
Market pricing and other trends we expect to see for these and other commercial insurance coverages are discussed in our complete report.
The Pandemic Heightens Employment Practices Liability Exposures
Employers are in an unprecedented situation. Laying people off or asking people to work remotely creates potential issues around discrimination, retaliation, invasion of privacy and other employment-related wrongful acts. Asking people to return to work during a pandemic is fraught with workplace safety and other issues.
For hard-hit COVID industries, such as hospitality and retail, carriers are increasing retentions substantially, cutting capacity and requiring COVID-related exclusions. In all industries, carriers are requiring more detailed underwriting information on the impact of the pandemic and controls in place, with some carriers placing a moratorium on new business.
In addition to requiring more detailed underwriting information on the impact of the pandemic and controls in place, carriers are also requiring updated diversity policies and evidence of tracking in light of current social unrest and increasing litigation.
Expected rate increases will depend on business class and employee count.
Remote Workforce Helps Fuel Hardening Cyber Market
As the pandemic drags on and many employees continue working from home, claims are starting to reflect the increased exposure of a remote workforce and the difficulty of securing networks that are accessed from off site. Due at least in part to conditions related to COVID-19, the market has continued to firm in 2020 and the industry is seeing rate increases, which are discussed more in our full report.
Underwriters are asking detailed questions regarding changes in protocols and incidence response preparedness for those businesses with claim activity. Carriers also are requiring additional information about patching, backups and downtimes as ransomware continues to proliferate.
Going forward, expect to see heightened underwriting scrutiny on incident response planning and disaster recovery, employee cyber security training, multifactor authentication for remote access to systems, external vulnerability scan reports (e.g., BitSight, SecurityScorecard, etc.) and third-party vendor vetting.
As one of the largest privately held brokers in the U.S., Hylant is dedicated to educating clients about industry issues and trends and how they could impact business insurance premiums and coverage availability. If you have questions about how they could impact your business insurance and would like to speak with someone, contact us.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.
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