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Avoid the Renewal Battle in This Rapidly Hardening Insurance Market

Angus Rhodes

The ability to present quality data in a timely fashion is key to a successful insurance renewal in a hardening market

Although conditions differ by line of business and geography, insurance rates have generally trended upwards over the last 12 months. After more than a decade of intense competition, commercial insurance buyers are now finding insurers much more disciplined at renewal. Due to pandemic, insurers should quickly adapt as conditions could get even worse in the near future.

Hardening market
The tide began to turn in early 2019 as property insurers raised rates for catastrophe exposed accounts following large natural catastrophe losses in 2017 and 2018. However, a more sustained and widespread change in market conditions now appears to be underway, with price increases and coverage restrictions now affecting a number of lines of business, including energy, marine, aviation and professional liability.

According to Marsh’s Global Insurance Market Index, commercial insurance pricing globally grew 11% in the fourth quarter of 2019, the ninth consecutive quarter of increases. However, the index also reveals that rate increases have been accelerating, from increases of 4.8% to 8% in the second and third quarters of 2019.

A combination of factors is driving change in the insurance market, including rising claims inflation, the ongoing low interest rate environment and concerns about large losses from climate change and cyber. Attritional losses have begun to eat into insurers’ profits, while years of price reductions have also left them more vulnerable to large losses.

According to a recent report, the top risks faced by insurers are:
• Cyberattacks and data breaches
• Damage to reputation/brand
• Business interruption such as COVID-19
• Regulatory changes
• Weather/Natural disasters
• Economic slowdown

As a result, insurance buyers are being told to expect to pay more for their insurance. In fact, Willis Towers Watson predicts that rate hikes and capacity constrictions will continue throughout 2020 and likely into 2021. Yet, the change in the insurance market is not only about rate. Many insurers have adjusted their risk appetite and underwriting strategies, while carriers are generally becoming more selective of the risks’ they are willing to insure and the capacity they are prepared to offer.

Insurance buyers are already reporting challenges associated with current insurance market conditions. According to UK risk management association Airmic, buyers are experiencing increases in pricing, reductions in the scope of cover, decreasing availability of cover for the limits of indemnity required, increased deductibles and in some cases complete withdrawal by insurers from specific industry sectors.

Tough choices
As the buyers’ soft market for insurance comes to an end, price increases and tough talking from insurers may come as a shock to some insurance buyers (the last real hard market for property insurance followed the 2001 terrorist attacks in the US and Hurricane Katrina in 2005). Today’s hardening market will require insurance buyers and their brokers to work much harder and smarter on their renewals to avoid going to battle. They will also need to disclose more information to insurers, explain and justify a higher insurance spend to stakeholders, including the CFO and the board.

A hardening insurance market might also mean some tough choices. In a soft market, higher limits and broad coverage are plentiful and affordable. In a hardening market, buyers may have to prioritize the coverage they need most and buy limits that better reflect their risk appetites and budgets.

However, insurance buyers do have options to lower the cost of risk, including restructuring of their insurance programs and/or greater participation by captives. The ability to demonstrate effective risk management should also translate to the cost of insurance. In a soft market, loss prevention measures are not always reflected in premiums, but as the market hardens, underwriters are actively looking to see action taken to address concerning exposures. For example, water damage claims have become a hot topic for underwriters and is an area where they are keen to see loss prevention measures.

Renew early
As a provider of technology solutions to corporate insurance buyers, we have noticed some clear changes in our clients’ behavior with regards to renewal preparation. Most are now starting their renewal preparations earlier and taking a more collaborative approach, with more input from both brokers and carriers. We have also seen demand for greater data transparency as insurers increasingly request clean, accurate and more comprehensive risk data to meet new underwriting guidelines and to differentiate between risks.

The challenge therefore for risk managers is threefold:
1. Collect more data
2. Collect better quality data
3. Collect data more quickly

Simplify and streamline the renewal process
However, insureds can make use of risk management solutions to provide full disclosure of their risk in order to persuade insurers to provide the best possible premiums and terms. Consolidating the data collected and tracking the status of the process is often a challenge during the renewal process.

That’s why a system driven renewal-management process can substantially reduce the time and effort required to gather and manage renewal data, but it also improves data quality and your team’s ability to process growing volumes of data. As a result, your organization can give brokers the information they need to price your organization’s risks and exposures accurately, ensure compliance with acts of disclosure, and avoid protracted claims-settlement processes.

Produce easy, successful renewal submissions
Clean, accurate and comprehensive data is the foundation of successful commercial insurance renewal submissions.

Click here to demo Venitv’s insurance renewal software, which makes it easier than ever to produce high-quality, successful submissions so you can avoid the battle altogether.

Apr 13, 2020


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