Large and unexpected losses due to the pandemic brought the insurance industry into a hard market, and the main issue impacting the Property Market in 2021 is uncertainty. No one really knows what COVID-19’s full impact will be on insurance losses and the U.S. economy in general. … No one can predict the weather either. Based on all of this uncertainty, here are the Top 5 Property Insurance Trends for 2021.
1 – Rate Increases
Due to major property losses in 2020, many insurers won’t achieve underwriting profit for the year, meaning rates for 2021 will increase anywhere from 15% – 25%. Analysis by ratings agency A.M Best shows in the first nine months of 2020, the U.S. property/casualty insurance industry saw its underwriting income fall to a total of $600 million, compared with a total of $4.5 billion for the same period in 2019. COVID-19 losses as well as premium credits given to many businesses forced to close during shut-downs had a major impact on underwriting income.
Besides COVID-19 losses, insurers also dealt with major claims from natural disasters and the nationwide protests and riots. The Insurance Information Institute states the total loss from property damaged during protests could be as much as $2 billion, the highest due to civil disorder in the nation’s history. That number is small compared to the losses from Hurricane Isaias, a disaster costing $3-$5 billion, and the losses from last year’s California wildfires.
2 – Extreme Weather Claims
The unfortunate trend of expensive natural disasters is expected to continue in 2021. Less than normal winter rain and snowfall in regions of California lead experts to believe the state is in for a “worse than average” wildfire season, even one that might be similar to the tragic 2020 season. The Tropical Storm Risk (TSR) has also issued a 2021 forecast predicting “above normal” hurricane activity. The organization forecasted 16 named storms for the Atlantic Ocean, seven of them hurricanes and three of those major hurricanes. Climate change experts suggest global warming is contributing to the creation of more “superstorms.”
3 – Digitization
When it comes to communications from insurers, TransUnion reported 18% of consumers now prefer a company’s mobile app. With the pandemic driving social distancing and less one-on-one contact, consumers are adapting quickly, demanding engagement through other channels. In response, insurers are taking more advantage of “internet-of-things” devices (for example, smart home or car tracker devices) to access real-time data from customers. They’re also increasing their use of third-party providers to keep track of all the consumer data and best utilize it to service customers. Needing to be more “digital” is inspiring more collaboration in order to provide new offerings by integrating 3rd-party apps through open APIs.
4 – The Changing Role of the Agent
As insurers continue with digitization, the role of the agent is becoming less involved in the actual quote process and more involved in being the role of an advisor or a “non-transactional” representative who provides a more “emotional” connection to the consumer. Most insurers now provide agents with technology platforms that reduce the time it takes to give quotes. They’re also empowering their agents with digital tools allowing them to complete their processes remotely, such as using e-signatures and e-documents.
With consumers now used to digital processes giving instant quotes and feedback, it’s more important for insurers to provide good service quickly. As a result, many are now taking a more team-based approach to serving customers who do have questions or who need customized solutions. Instead of a customer building a relationship with one agent, they’re being serviced by a team of agents able to give quick responses because they’re working together.
5 – Greater Scrutiny and Exclusions from Underwriters
The current hard climate means underwriters will continue a high-level of scrutiny of new and current applicants. In order to help clients get the best rates at application or renewal time, agents should advise individuals and business owners on how to present their properties in the best possible light based on quality risk information. It’s also best to advise them to begin the renewal process early in case they end up having to apply with a new insurer.
Since carriers are also dealing with substantial loss from event cancellation insurance and property damage claims stemming from protests, expect to see underwriters adding more exclusions to policies. Many are now adding exclusions for “riots” into new policies, and the many who didn’t add exclusions for “viruses” or “pandemics” after the SARS outbreak are now adding them in the wake of COVID-19.
NIF | Jencap is ready to meet the challenges of a hard market and the uncertainty of 2021 with many coverage options. We have a wide range of property markets including coverage for commercial, excess, inland marine, liquor liability, and pollution liability. Contact us for a quote.