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MARKETPLACE
Broker
Survey: Higher Prices, Stricter Underwriting in Effect
Compiled by Lynna Goch
A special survey by the Council of Insurance
Agents and Brokers establishes a benchmark for assessing the impact
of the World Trade Center attacks on the future market. Given
dramatic fluidity in the commercial insurance market in the wake
of the Sept. 11 attacks, the council compared the commercial property/casualty
insurance market as of late 2001 with market conditions as they
were one year ago.
In addition, it focused on changes in use of
alternative-market mechanisms to meet commercial insurance consumers'
needs.
For more than two years, the council has documented
significant hardening of the commercial insurance market. Now,
according to respondents, primary carriers have tightened policy
terms and conditions significantly, and rates are accelerating
their upward trend. For example, one broker said a general liability
policy costing $5,800 last year, on renewal in late 2001 cost
$12,000, with most carriers declining the coverage altogether.
"As significant as price increases are
to commercial customers," said council President Ken Crerar,
"the market has been hardening for quite some time. But,
the real story emerging since Sept. 11 is the emergence of stringent
underwriting."
 Survey
respondents reported that primary carriers have imposed more restrictions
and higher deductibles, as well as eliminated blanket limits for
some lines. Some brokers report trouble finding umbrella coverage
without layering the higher limits.
"Findings confirm what industry leaders
have said since Sept. 11. Carriers are looking at exposures risk
by risk and deciding what to cover and at what price," Crerar
said.
Brokers reported that they are increasing the
use of alternative markets to cover risks that prove difficult
to place in the current primary market. Some 44% of survey respondents,
45 out of 103 participants, say they are more often turning to
alternative mechanisms to meet their clients' needs.
Comparing Nov. 1, 2000, with Nov. 1, 2001, the
survey showed overall rate increases for small, medium and large
commercial accounts and in eight lines of business. Findings show
no significant rate decline for any line of business or account
size.
While a majority of the 103 brokers responding
to the survey reported increases of 10% to 30% in all account
sizes, medium and large accounts realized the greatest gains.
For specific lines--auto, workers' compensation,
general liability, reinsurance, business interruption and aviation--average
price increases were between 10% and 30% in 2001. Twenty-six percent
of respondents said business-interruption rates were up 30% to
50% over last year.
The largest price increases occurred in the
property and umbrella coverages, the lines most affected by the
Sept. 11 attack. A near majority of brokers said rates for property
(46%) and umbrella lines (44%) are up as much as 30% to 50%.
Anecdotally, members reported trends worth watching
in future surveys. Certain property lines--particularly habitational
property--are up 50% or more since a year ago, and umbrella coverage
is expensive and hard to get.
Brokers also reported rate hikes of more than
50% in some states for certain "difficult exposures,"
such as nursing home liability, construction, aviation, trucking
and workers' comp.
Top
Small-Business Pension Plans Protected
by Hartford Program
Small-business owners who offer their employees
a pension plan, medical insurance or life insurance may face personal
liability if they breach any of their fiduciary responsibilities,
obligations or duties as defined by the Employee Retirement Income
Security Act of 1974. Hartford now offers small-business owners
coverage for this exposure through its Fiduciary Liability Small
Business option.
This option offers $100,000 of protection for
an annual premium of $150 to qualified companies with 25 or fewer
employees.
Fiduciary liability applies to anyone who owns
or manages a small business and is named in the plan document
or identified as a plan sponsor; exercises any discretionary authority
over the management, administration or disposition of plan assets;
or provides investment advice for compensation. Even a business
owner who delegates administration of a plan to outside experts
can be held personally liable for errors or misrepresentations
in the plan.
Top
Chubb Specialty Targets
Professional Liability Lines
Chubb Specialty Insurance, part of the Chubb
Group of Insurance Cos., consolidated three of its product groups
into a new business unit called Chubb Professional.
ChubbPro will focus on the rapid changes taking
place in the professional liability marketplace and develop products
in related arenas, such as mergers and acquisitions and tax liability,
said Chief Operating Officer Robert C. Cox.
ChubbPro will underwrite errors and omissions;
media/intellectual property; mergers and acquisitions; and customized
employment practices liability, crime insurance and other specialty
products for professional-services firms.
Source:
Best's Review, January 2002
Copyright 2002, A.M. Best Company
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