Rates for most commercial lines of insurance are likely to continue rising going into 2022, as claims costs mount across the board.
A new report from Marketscout notes that rate increases have accelerated across all major lines, but have been most pronounced in liability coverages.
The composite rate for commercial insurance pricing in the third quarter of 2021 was up 6.8% from the same period in 2020. The year-on-year rate of increase is higher than the 5.9% logged in the second quarter.
The factors driving these rate increases show no signs of waning. There are a number of factors affecting rates and they vary depending on where a business is located as well as the industry in which it operates. Insurance experts are predicting average rate increases of about 5% to 10% across most lines of coverage.
The Marketscout report looking at the third quarter of 2021 shines a spotlight on what business owners can expect going into 2022.
Here’s what happened in the third quarter:
Commercial property
Commercial property insurance rates increased 9% on average in the third quarter, compared to the same period in 2021.
Rates will vary depending on the location of a business. Companies in areas at high risk of natural catastrophes, like tornadoes, hurricanes, hailstorms and wildfires, are seeing the highest rate hikes, as well as non-renewals and even difficulty in securing coverage. For example, in wildfire areas of California and wind zones of Florida, rates were up over 20%.
What’s driving rates: Increasing frequency of natural catastrophes, as well as the severity of those events. Also, higher rebuilding costs due to materials price inflation and labor shortages.
Employment practices liability insurance
EPLI insurance rate increases averaged 9% in the third quarter.
What’s driving rates: According to industry experts, retaliation and sexual harassment claims, gig worker classification, the gender pay gap and medical marijuana usage were among the top trending employment practices litigation types.
Moreover, the average cost of employment-related claims is rising, along with the length of time it takes to resolve a claim.
Commercial auto
The premium renewal rate averaged 9% in the third quarter of 2021, continuing a trend of rising rates.
What’s driving rates: An increasing amount of accidents and deaths caused by distracted driving, higher medical costs for accident victims, and rapidly climbing repair costs for vehicles.
General liability
The premium renewal rate rose on average 6% in the third quarter.
What’s driving rates: Higher jury and settlement awards. Increased litigation and higher medical costs for bodily injury claims, as well.
Business owner’s policies
The BOP premium renewal rate increased in the third quarter at an average of 4.7% from the same period in 2021.
What’s driving rates: Since BOPs include property and liability coverage, the reasons rates are increasing are due to why property and general liability rates are rising, as above.
Umbrella and excess liability
Umbrella and excess liability insurance saw rates go up 11.7% in the third quarter from the same period the year prior.
What’s driving rates: Rates for these coverages continue climbing due to a number of factors, including large judgments, the cost of litigation and a rising tide of lawsuits against businesses. Gallagher notes that the median verdict for the top 50 cases has doubled in the past four years.
Workers’ compensation
This is the bright spot as rates have remained flat or falling for many years. The third quarter was no exception.
The takeaway
As your policies come up for renewal, it’s good to get a head start on shopping around. If you are concerned about your rates, give us a call.