April 22, 2002—The Council of Insurance Agents and Brokers Commercial Insurance Market Index, a measure of changes in price trends, shows that insurers have responded to the Sept. 11 attacks by placing sharp restrictions on their risk exposures—not only to terrorism, but also to a variety of hazards, including asbestos, mold, windstorms, earthquakes and others.
The survey data show the marketplace is experiencing sharply higher premiums, higher deductions, lower limits and restricted capacity across the major lines of commercial insurance.
The majority of premium increases for the first quarter 2002 were in the 10 percent to 30 percent range for all account sizes, but one-fourth of the medium-sized accounts and nearly one-third of the large accounts experienced price hikes of 30 percent to 50 percent, the Council’s survey shows.
Such rate hikes came on top of similar premium increases for medium and large accounts during the Jan. 1, 2002, renewal period (reported in the Commercial Insurance Market Index released Jan. 16, 2002).
But for some business types, premiums were two to three times higher—if coverage could be found at all. Agents and brokers surveyed also reported the price explosion and limited availability of umbrella policies, evident in the previous quarter, continues for all types of coverage.
“We’re seeing the trickle-down effect of rate increases,” said Ken A. Crerar, president of The Council. “Over the last three months, we have moved beyond initial difficulty with high-profile or high-exposure properties to an environment where the broader marketplace is affected. Though our surveys since January 2000 have shown that harder market trends began well before Sept. 11, they have really picked up steam since then. Leaders from throughout the industry have warned Congress that action is needed and needed now.”
Increasingly, restrictions are placed on lines that have nothing to do with terrorism, as insurers move to tougher underwriting and assessment of risks in an effort to rebuild capacity after Sept. 11 and recoup nearly a decade of underwriting losses.
The Council’s survey found chief among exclusions—including widespread use of the ISO terrorism exclusion—are those for mold, asbestos and other environmental hazards for residences, apartment buildings and low-income housing, as well as liability limits placed on acts of nature, such as hurricanes, earthquakes, windstorms and floods.
The survey asked brokers to describe their customers’ reactions to the tighter markets, higher premiums and explosions in deductibles and exclusions. Predictably, the most common consumer response is frustration, although respondents said most of their customers are aware of changing market conditions and not surprised by current trends and developments.
For more information, contact the Council of Insurance Agents and Brokers.
