2024 Commercial Insurance Market Outlook
By: Matt Yost
Commercial Property
Market Trends
2024 PRICE PREDICTION:
CAT-free: +5% to +15%
CAT-exposed: +15% to +25%
- Natural Disasters - In 2023, the United States experienced a record number of billion-dollar climate and weather disasters, with damages exceeding $57 billion, many of which occurred in the traditionally low-risk midwestern states. To make matters worse, climate experts predict that natural disaster trends will continue to exacerbate commercial property losses in the future.
- Inflation Issues - While material cost increases have slowed from their peak in 2022, supply chain shortages, fluctuating material demand, and rising labor costs have challenged the construction sector.
- Carrier Requirements - To lower risk profiles, many insurance carriers have begun mandating wind and hail deductibles and requiring Actual Cash Value settlements on older roofs.
- Reinsurance Capacity - Properties in CAT regions will continue to see reinsurer capacity as an issue, but businesses with properties in favorable geographic areas should see price stabilization by the latter part of 2024.
General Liability
Market Trends
2024 PRICE PREDICTION
+1% to 10%
- Litigation Concerns – Third-Party Litigation Funding (TPLF) is anticipated to be a $30 billion industry by 2028 and is a key factor of social inflation. TPLF is the practice of a third-party providing funding to finance a lawsuit in return for a portion of the settlement. This form of funding has increased the cost of litigation and the frequency of suits being filed.
- Corporate Image - The overall public sentiment toward large businesses and corporations is deteriorating, and anti-corporate cultures are more prevalent than ever. This environment can increase settlement costs.
- Increased Medical Expenses – Medical costs from third-party injuries constitute a significant portion of general liability insurance. Over the previous 12 months, the Bureau of Labor Statistics found that prices for prescription drugs, outpatient care, and hospital services increased by 3.1%, 5.7.%, and 4.2%, respectively.
Commercial Auto Insurance
Market Trends
2024 PRICE PREDICTION
Flat to +10%
- Inflation Issues – According to the BLS, repair prices increased by 23% between 2022 and 2023, nearly quadrupling the average inflation rate. Higher prices for parts and labor drive up claim expenses for insurance carriers.
- Driver Shortages – According to the American Trucking Association (ATA), the nation’s driver shortage in 2024 is expected to exceed 80,000. As a result, companies are lowering their driver applicant standards to fill open positions. Drivers with less experience and shorter driving records are more likely to be involved in accidents.
- Nuclear Verdict Concerns – The American Transportation Research Institute (ATRI) has found that trucking verdicts have increased by more than 50% each year for the past decade, with nuclear verdicts in the sector doubling during this time frame.
Umbrella Liability
Market Trends
2024 PRICE PREDICTION
+0% to +10%
- Reinsurance Considerations – Capacity from reinsurers has softened, especially for mid-market businesses with premiums between $10,000–$100,000, as carriers have found this sector more profitable overall. Businesses with large auto fleets and high-hazard products will continue to find 2024 a challenging market for excess coverage.
Executive Lines
Market Trends
2024 PRICE PREDICTION
+5% to +20%
- Employment Practices Liability – According to industry data, most policyholders experienced rate increases of 3% to 7% in 2023. Retentions at renewal are generally the same, but renewal premiums in 2024 are expected to be lower than expiring premiums for companies with favorable loss history.
- Directors & Officers Liability – Heading into 2024 industry experts anticipate that favorable market conditions will persist for privately held companies, allowing for decelerated premiums and widened capacity.
- Cyber Liability – Market conditions softened in 2023 and are expected to continue into 2024. Low-hazard companies will see flat to modest price changes, while companies with elevated cyber exposures could still see significant rate increases. In all cases, a lack of form standardization and customized exclusions should be monitored.
What Can You Do?
- Evaluate your commercial property limits and make inflationary adjustments to ensure you are not underinsured. Doing this will reduce the likelihood of experiencing a coinsurance penalty in the event of a claim.
- Develop a documented business continuity plan that will help you remain operational in the event of an incident.
- Review or develop vendor and subcontractor agreements that can insulate you from a lawsuit that could cause a disruption to your business.
- Implement and update employee handbooks with policies pertaining to discrimination, harassment, medical leave, and general employment expectations.
- Examine your risk management practices relative to your fleet of vehicles and drivers. Implement safety programs pertaining to safe driving, driver qualification, hands free devices, and a family use policy.
- Talk to a Hummel Business Risk Advisor about other strategies that will help mitigate loss!
This document is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
Read the full Spring 2024 newsletter here.
Resources:
© 2023 Zywave, Inc. All rights reserved.
Reinsurance buyers find ‘smoother’ January renewals with ample capacity: Carpenter (2023) Insurance Journal. Available at: https://www.insurancejournal.com/news/international/2023/12/29/753875.htm (Accessed: 20 January 2024).
‘State of the Market / 2024 Outlook’ (2024). Grand Rapids: AMWINS. Available at: https://www.amwins.com/docs/default-source/insights/sotm_2024outlook.pdf?sfvrsn=a3c2dea5_2
