What Can You Expect From Your 2023 Insurance Renewals?

Why bury the lead? Rate increases are likely given current market forecasts. According to 2023 Market forecasts, the consensus is that 2023 will present some challenges for businesses in the placement of their benefits, property, and casualty insurance programs. Here are some of the challenges:

Medical Benefit Issues

• One of the biggest expenses behind payroll is the cost of a medical benefit program.
• Keeping a lid on rising health care costs will likely remain at the forefront for organizations this year, for good reason.
• Factors contributing to the rise in health care costs: widespread inflation, economic instability and increased health care utilization as a result of the pandemic.
• Employers are still under pressure to recruit and retain talent by providing an attractive benefits package to entice team members.
• Team members still value a benefits package and expect it as part of the total rewards package.

It’s imperative for an employer to shop all viable options in the marketplace as a fiduciary responsibility to the organization and the employees. Shopping fully funded plans and exploring alternative funding options (self-funding, level-funding, reference-based pricing) will not only provide you competition but a larger outlook on all your options. The state of CA uses a few metrics to look at 2023 health benefits increases. CALpers (the largest employer and purchaser of medical insurance) is estimating an overall 7% increase and Covered CA (the state exchange) for individual insurance is estimating a 6% increase.

Property Issues

• Insurers are facing large third-quarter catastrophe losses, mainly from Hurricane Ian.
• Estimated insured losses total over $50 billion from storm-related losses. This does not include recent California storm damage.
• Capacity issues for business with large property values.
• Greater focus on “insurance-to-value” in view of rising construction costs.
  

Although businesses located in catastrophe prone areas will see the largest increase, from our experience some will spill over into the broader market as insurers try to return to profitability. Underwriters will be under pressure to increase rates where they can, particularly in the catastrophic exposed areas (15% -30% or more) and non-catastrophic areas (8% – 10%).

Casualty Issues

General Liability will see a hardening of the market conditions seen in the past four years, driven by general inflation, social inflation, and higher court awards and settlements. Higher casualty rates in 2023 are expected. However, some are predicting rates to moderate in 2023 with more stability returning to the market, with a rate forecast of 5% to 9%.

Auto Liability remains an unprofitable line of insurers whereas rates are driven by poor industry results. In 2023 we will likely continue to see rates going up 7% to 9%, with Umbrella Liability forecast at 5% to 8% (middle-market businesses).

• California state temporary and permanent total disability benefits will increase 5% as of Jan 1, 2023 due to an increase in the state’s average weekly wage.
• Drop in COVID related workers’ compensation claims. The average claim cost over the two—year period of $9,600.
• Rate Forecast: 5% – 10% (this can vary significantly based on individual class code rates).
• Rate Forecast: 5% – 10% (this can vary significantly based on individual class code rates).

Cyber

Market is driven by large losses. It’s been unprofitable for insurers:

• Some carriers have withdrawn from the market.
• Speak with individual managers before formulating a proposed cutback plan.
• Cyber is written very selectively.
• Offer other managers and supervisors a chance to react, discuss, and help revise the plan.
• Underwriters carefully review all applications with a focus on network security.
• Limits offered are restricted, some give $1M only.
• For new business, more declinations received than carriers willing to quote.
• On the positive side, businesses have improved their cyber/network security including training of staff.
• Rate forecast: Rate increases of 25% to 50% are common. Still high, but some moderation is expected.

Management Liability – Directors & Officers, Employment Practices:

• Buyers can expect more competitive market conditions driven by increased capacity.
• Primary market more stable than high excess placements.
• General view is that there is rate adequacy, with more moderate increases expected.
• Market Forecast: 4% – 5% (for businesses with favorable financials and loss history).

Other Considerations

• Businesses that have a long and profitable relationship with their insurance companies will command better pricing.
• Renewals of those businesses with a profitable history with its insurers will be viewed more favorably by underwriters who will be more willing to work with the insurance broker/agent to retain the business.
• Businesses with favorable loss experience and who have demonstrated a strong commitment to loss control will deserve lower rate increases.
• Re-visit deductibles as a way to manage rate increases. Does it make sense to increase?
• Ask for suggestions regarding voluntary reductions in time or other suggestion for saving money.
• The rate is only one component used to determine premium. In addition, you must consider estimated ratable exposures for the upcoming 2023-2024 policy year: Payroll, Sales, Property / Business Income values, Number of vehicles, etc.

It was difficult to estimate the exposure bases in the last two years due to the pandemic. As businesses return to normal operating conditions, annual estimates should be more in-line with the actual results. Still, based on the information available to us at this time, here is our best estimate:

2023 Projected Rate Insurance Increases

• Medical Benefits…………….. 6%-15% (or higher due to medical loss ratio)
• Property……………………………….. 8% -10%
• General Liability……………… 6% -7%
• Auto……………………………………….. 7% – 9%
• Umbrella…………………………….. 5%
• Workers’ Comp…………….. 15% (or higher due to the experience-mod)
• Management Liability.. 3% – 5%
• Cyber Security……………… 25% – 30%
• Kidnap & Ransom……….. 5%
• Open Cargo…………………….. 3% – 5%