A Shifting Market
Since 2019, the commercial insurance sector has been grappling with a hard marketplace that is particularly less friendly to insurance buyers. Such challenging conditions were brought on by a confluence of factors that led insurance companies to reevaluate their positions in the industry. After all, the increased frequency and severity of claims, growing social inflation issues, lasting complications created by the COVID-19 pandemic, evolving cyber threats, and worsening natural disasters have fundamentally reshaped the insurance market. As a result, hardened conditions have pressed on for multiple years, prompting limited capacity, stricter underwriting standards, and rising premiums across many commercial coverage lines.
Like many other sectors of the economy, the insurance industry experienced further changes to its market cycles and operating procedures in the last 12 months. Specifically, in contrast to recent years, hard market conditions somewhat started to ease. This stabilization became especially evident in the second half of 2022—highlighted by decelerated pricing and expanded capacity within several coverage segments. While this shift certainly represents signs of an improving insurance landscape, industry experts have asserted that ongoing headwinds facing certain lines of coverage (e.g., commercial property, auto, and cyber) have continued to generate hardened conditions overall, therefore limiting the likelihood of a soft market emerging in the near future.
Moreover, businesses have had to contend with various new and existing challenges over the past year. In particular, 2022 marked the third year of the pandemic, which has remained a driving factor in various workplace adjustments and associated operational difficulties. Additionally, 2022 saw an acceleration of ongoing supply chain disruptions and labor shortages for businesses of all sizes and sectors. Further complicating matters, record-setting inflation trends, the growing possibility of a recession, and large-scale international events—namely, the Russia-Ukraine conflict—have only exacerbated commercial exposures. Altogether, these factors will likely continue to fuel an increase in claims and related costs, posing persistent coverage concerns.
With this in mind, industry experts anticipate that the commercial insurance space will remain challenging in 2023. However, it may present more favorable conditions than it has in prior years for some insurance buyers. In any case, businesses need to take a proactive approach to bolster their risk management efforts and secure adequate coverage during this time. Especially amid an evolving risk environment, businesses should focus on addressing the factors they can control.
For business owners like you to successfully navigate the constantly evolving commercial insurance market, it’s important to consult insurance professionals who understand your business, help you plan for unique risks, and advocate on your behalf. You need insurance professionals who can tell your story to insurance carriers in a way that will best position your business come renewal time. You also need to work with insurance professionals who know the dynamics of the current insurance market cycle and how to navigate a hard market successfully. Additionally, you need insurance professionals who fully comprehend your industry and how to provide targeted loss control solutions.
Trends to Watch in 2023
- Labor Shortages
- Supply Chain Disruptions
- Inflation Issues
- Recession Risks
- Social Inflation Concerns
- Third-party Litigation Funding
- Tort Reform
- Plaintiff-friendly Legal Decisions and Large Jury Rewards
- Extreme Weather Events
- Geopolitical Conflicts
2023 Market Outlook Forecast Trends
Price forecasts are based on industry reports for individual lines of insurance. Forecasts are subject to change and are not a guarantee of premium rates. Insurance premiums are determined by a multitude of factors and differ between businesses. These forecasts should be considered general information, not insurance or legal advice.
|
LINE OF COVERAGE |
PRICE FORECAST |
|
Commercial property |
CAT-free: +10% to +15% CAT-exposed: +15% to +25% |
|
General liability |
Overall: 0% to +10% |
|
Commercial auto |
Overall: +3% to +15% |
|
Workers’ compensation |
Overall: -5% to +5% |
|
Cyber |
Overall: +25% to +100% |
|
Directors and officers liability |
Private/nonprofit entities: -10% to +7.5% Public companies: -15% to +2.5% |
|
Employment practices liability |
Overall: +10% to +15% |
Moving Forward
It can sometimes seem like the forces determining your insurance rates are beyond your control. But, as an insurance buyer, it’s important to know how your premiums are calculated, what trends influence the market and what you can do to get the best price.