Let’s Get Creative
These days we can’t help hearing the rumblings about hardening markets.
Increasing claims and litigation, broader definitions of liability, and sky-high compensatory jury awards are hitting bottom lines and, many say, affecting the price and availability of property/casualty coverage.
Responses to The Council’s latest quarterly Commercial Property/Casualty Market Index Survey illustrated an increasing awareness of the impacts of social inflation—the tendency of jurors to award piles of money for successful tort liability claims, raising plaintiffs’ expectations of generous settlements. These settlements hit insurers’ margins. In response, premiums may increase, and coverage may decrease. Our survey also indicated noticeable price changes in D&O, general liability, umbrella, and commercial auto. Umbrella premium increases broke double-digit figures (13.6%) for the first time since 2001-2003 (9/11 and its aftermath); and commercial auto saw an average premium increase of 10.5%, with 62% of respondents noting decreased underwriting capacity for this line. The number of claims rose in other lines. Forty percent of respondents said there was an increase in the number of D&O claims; 46% said there was an increase in GL claims (compared to 35% Q3 2019).
What stands out to me, though, isn’t what the experts are deeming a “systemic change” in liability losses or the gaudy numbers you’ll read about in our feature story on social inflation this month. No. I’m more concerned with the narrative social inflation is creating across our industry.
Risk is always changing. Look at cyber, for example. As our foreign desk chief Adrian Leonard writes this month, “the peril is dynamic, changing as fast as technology. Cyber crosses the tangibility barrier that divides property and casualty risks, as well as the geographical boundaries that subdivide risk portfolios. The manageability of cyber risk, alongside most insureds’ lack of preparedness, has driven an unprecedented entry of carriers and brokerages into active risk management. Cyber even presents genuine catastrophic potential, a perceived peril so great that talk of state-backed risk pools has been circulating for years. A market-loss index alongside fascinating work on parametric triggers could change the landscape. What’s not to like?”
Cyber is still new and riddled with problems, but we’re not running away from it. And yes, as soon as carriers realized they were on the hook for millions or more in unintended exposures from so-called silent cyber, they did begin to pull back and carve out. But look at all the creativity that has popped up in its place.
I’m tired of stories that position social inflation as the reason why we can’t do something for our clients. We all know that we will find other ways. It may take new markets or old markets revisited. It will take creativity, and it will show your clients why they’re with you.
Look at the risks through a new lens. Ask different questions. Shift the focus. Good brokers thrive in tough markets.