A new report from specialist outsourced insurance buyer Mactavish has found that not only are commercial insurance policyholders currently facing higher premiums, but they could be paying even more for coverage next year.
Citing market surveys, Mactavish noted that premiums across the board have increased by an average of 34%. But, individually, lines such as crime, professional indemnity, pension trustees’ liability and directors’ and officers’ insurance have all increased far more than the average – as much as 800% in some cases. The report also noted that some industries have taken more hits than others. In particular, firms in the construction, energy, food and beverage, travel, manufacturing and waste sectors will be facing hurdles when it comes to insurance renewals, the report said.
It noted that the extreme increase in insurance costs is due in part to insurers looking to improve their margins in a hardening market. In addition, insurers have been putting greater focus on emerging risks that have taken centre stage in recent times, such as the increase in cybercrime – a trend that blew up after workers transitioned to remote work due to the COVID-19 pandemic.
Mactavish also said in its report that it has seen “considerable erosion in the quality and extent of the insurance cover offered to policyholders,” as insurers look to protect their reserves and minimise claims payments. This degradation could be buried under terms & conditions while insurers and brokers keep tight-lipped about it, and it could leave policyholders unaware of their increased exposure, Mactavish warned.
The insurance governance specialist also cautioned that it expects rates to continue to climb in 2021, and that it could even reach a point where some companies will be unable to pay for their cover. That could eventually lead those companies to reduce their operations, lay-off employees or even go into administration.
“For years, the insurance industry has sold its cover on the basis of price as opposed to quality and this has pushed premiums down, when in many cases they should have been higher. The insurance market is hardening now, and premiums are rising dramatically as insurers seek to make up lost ground quickly,” said Mactavish CEO Bruce Hepburn. “The timing couldn’t be worse for firms that are still being battered by the economic fall-out from the pandemic. For some businesses, these unexpected cost increases could be the final nail in the coffin.”
