Mid-Year Economic, Insurance and Risk Management Marketplace Update

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SVP, Sales and Marketing
+1 763 746 8271
July 24, 2018Minnesota

 

Although 2017 was the worst year in the last decade for catastrophic losses, the economic and insurance marketplace continues to perform well.  Despite the high level of natural disasters and substantial change in the auto/truck risk, insurance premiums remain competitive.  

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The main areas of risks come from:

  • Coastal property – Property susceptible to hurricane, flood and wind activity
  • Auto/truck loss experience – Across the U.S. due to increased values, technology, inattentive driving and excessive use
  • Cyber losses – A problem across all industries, but especially public and non-profit 
  • Habitational property loss experience – Excessive buildout and inefficient pricing
  • Political uncertainty – Funding  (especially, public sectors, education and non-profits)
  • Predictive modelling – Data/analytics across the industry.  Insurance carriers have more analytics at which to assess risk within certain industry segments to make decisions without understanding all other variables such as culture and values 

As a general rule and occurrence, insurance pricing (with the exception of auto) remains to be competitive. Insurance carriers are very interested in retaining their current customers by offering renewal terms that are similar in price with no change in coverage. Coverage examples include:

  • Property:  An average of 0% to 4% increase, with property valuations continuing to go up
  • Liability:  An average of -2% to 3% increase
  • Crime, including Social Engineering:  0% to 5% increase 
  • Automobile:  6% to 11% increase 
  • Workers’ Compensation:  Pricing continues to decrease, but will most likely change within the 18 months as a result of: 
    • Inability to hire talent
    • Lack of continual safety training
    • An aging workforce
    • Under-pricing of risk
    • Increased Experience Modification Factors (rates will not support expected/actual losses)
    • Re-engagement of medical cost inflation
  • Umbrella: Flat pricing unless primary exposures increase (increase in sales of number of autos)
  • Professional Liability/Errors & Omissions/Directors & Officers Liability/EPLI:  Will see 4% to 10% increase due to loss experience

Marketing Philosophy

The marketplace today is remaining constant and consequently, terms and pricing are similar across the market. The focus for the foreseeable future will be on whom can best manage the “total cost of risk” to the lowest possible level by providing the education, strategy, knowledge and services to the customer.  

Marsh & McLennan Agency may “soft market” its business in order to get a full understanding of carriers’ predictive models and where they price risk.  We do not necessarily recommend moving to a new carrier when the customer has placed substantial premium with an incumbent carrier, because it supports better management of claims adjusting and payment.  

However, we also know the market and when is the appropriate time for our customers to move.  Each and every customer of MMA has a strategy and plan for insurance and risk management program management, cost and level of risk comfort, as well as alignment with certain carriers who have a similar value system to yours. This strategy will automatically call for entering the marketplace every two to three years to assure pricing, services, values, and ultimate cost of risk are in line with expectations. 


For specific questions on how the current marketplace affects your business, contact your local Marsh & McLennan Agency representative.

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This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such.  Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein.  Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors.  Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

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