Amid market uncertainty, insurance experts share what to expect

Oct. 21, 2020

This paid piece is sponsored by Marsh & McLennan Agency.

The second quarter of 2020 marks the 11th straight quarter of business insurance rate increases.

When will we stop counting the number of consecutive quarters of rising insurance costs? Unfortunately, not as soon as we would all like based on current indicators.

Organizations are under enormous pressure to manage evolving risks, anticipate emerging trends and find reprieve from one of the toughest insurance markets experienced in decades. Moreover, this is the first full quarter of results in the shadow of COVID-19, so we are just starting to see how market uncertainty is playing out.

While the landscape may look forbidding, Marsh & McLennan Agency continues to monitor the market closely, seeking to provide insight, uncover opportunities and problem solve for clients for the weeks, months and years ahead.

“The market is in a constant state of transition right now, including a history of the last few years bringing an increase in large, difficult and unprecedented claims, leaving insurance carriers to increase rates and decrease risk to refill depleted coffers,” said business insurance marketing manager Lydia Zaharia.

“In this challenging time, it’s difficult to forecast without knowing what will come, but I believe businesses should expect an increase in rates, a decrease in limit capacity and a tight time line at renewal at some level across their insurance program. The best advice I can give is to be flexible, evaluate your actual insurance needs, plan for an increase and ask your insurance agent to let you be a part of the process if they aren’t already.”

Even before COVID-19, the insurance marketplace was already being strained by perceived exposure and loss concerns around large fleets, non-owned automobile, long-haul trucking, glyphosate, traumatic brain injury, sexual abuse and molestation, opioids, wildfires, CBD, active shooters and climate change risks.

Now, the marketplace is faced with additional concerns related to an unprecedented unemployment landscape, growing ransomware attacks and data privacy fraud, travel restrictions, international trade tariffs, inflation, supply chain disruptions, bankruptcies, social unrest, state legislative changes related to COVID-19 immunity and the growing anxiety from working from home. It is clear that many factors are converging and exacerbating an already volatile marketplace.

Carriers do want to grow but only within their limited space and appetite. Commonly, carrier leadership will mandate strict underwriting guidelines, directing where to focus the insurer’s financial capacity. With capacity constricted, many businesses are at the mercy of the market. Competing carriers on businesses desired by the insurance market will be more likely to offer more competitive pricing over the incumbent. Businesses can be proactive by taking pre- and post-loss mitigation steps. MMA can advise you on best practices for the successful placement of your insurance and the optimal pricing of your program.

“We work with our clients year round, preparing them to be a desirable risk in the market to ensure they can get the best coverage at renewal,” Zaharia said. “This conversation is about so much more than just traditional insurance coverage, and partnering with an agency that is able to help you advocate for yourself in the market is the best thing you can do. If we do our job well, our clients are never taken by surprise by a change, having adequate time to prepare and budget for the renewal.”

During these difficult times, MMA marketing and placement specialists continue to be creative at finding ways to make positive impacts on behalf of our clients in the marketplace. It has never been more important to start the renewal process early — 90-120 days in advance or sooner — so that every option and alternative solution can be vetted. It likely will be necessary to market your risk this year and the next as the seismic shifts in the marketplace are really just beginning.

“At MMA, we owe it to our clients to provide them with as much information as possible on what impacts the current hard market will have on their overall risk program,” said Josh Gassen, vice president of business insurance.

“Fortunately for our clients, we are a part of not only the largest insurance brokerage nationally but globally, which enables us to have access to real-time, up-to-date information on the marketplace and positions us to provide transparency and alternative options to our clients to help them preserve their fiscal and risk management goals.”

The cyclical nature of the insurance market was recognized as early as the 1920s. Over the past century, it was seen as a defining feature of the market. The last three hard markets in the U.S. were 1975-78, 1984-87, and 2001-04.

For many organizations, this may be their first experience with truly hard market conditions. This hard market may turn out to be one of the toughest of all time with a full spectrum of traditional and emerging risks. It is possible, however, that a long-term economic downturn will have providers in the insurance marketplace eventually easing rates as they compete to preserve market share. Uncertainty remains.

The challenges and emerging risks that businesses are confronted with today are massive, especially during a time when businesses struggle with running their businesses to meet their customers’ changing needs. We need insurers to remain solvent so they can honor the promises that they made knowingly and intentionally — and that we all rely on them to keep. It is more critical today than ever before to make sure your business has access to trusted advisers who know how to develop solutions to meet your business challenges, both tactically as well as strategically.

“Be inquisitive, and ask a lot of questions, especially now as many organizations are working through their 2021 budgeting forecasts,” Gassen said. “There are numerous tools and resources throughout the insurance industry to assist businesses in navigating this difficult market. Now, more than ever, is the time to lean heavily upon your broker as we traverse these unprecedented times together.”

Insurance is but a small part of the whole. Capital and risk management decision-making analytics and benchmarking, emerging risk best practices, along with coverage and risk control innovation, can bring essential knowledge and solutions to your business.

Marsh & McLennan Agency is positioned and ready to meet your present and future business needs. MMA will work with you to create an aligned strategic plan that is supported by industry expertise, data, required services and practiced risk management techniques. For further information, please contact your local MMA representative or visit MarshMMA.com.

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Amid market uncertainty, insurance experts share what to expect

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