4th Quarter Insurance Risk Newsletter 2021

2022 market forecast

What’s New: 2022 Market Forecast

The global insurance industry will reach a new record in premiums by mid-2022, exceeding $7 trillion, according to a new forecast by Swiss Re Institute. According to the study, commercial insurance premiums are expected to grow by 3.7% in 2022. This growth reflects increased risk mindfulness in the wake of the COVID-19 pandemic and continued hardening of commercial lines, Swiss Re said in the report, “Turbulence after lift-off: global economic and insurance market outlook 2022/23.”


However, the expectation for each line of commercial coverage isn’t equal. Property/Catastrophe rates are predicted to improve in 2022 after a year of above-average loss experience (with the exception of wildfires in the west). The commercial property insurance market could also see increased competition among renewals next year, as additional capacity continues to enter the market. 


The average property rate increase in 2021 year-to-date has been 8-10%, however, the rate increase wasn’t the only obstacle to buying property coverage in 2021. Property age, as well as status of updates to the electrical, plumbing, roof, and HVAC, became a much more significant piece of the underwriting model in 2021. Many carriers have tightened their capacity/underwriting appetite regarding these factors and will continue to be restrictive in 2022. However, experts expect better rates in 2022 for insureds that prioritize risk improvement.


In contrast, experts expect Auto, General, and Umbrella Liability rates to remain strained due to increasing claims costs and poor underwriting results. While the volume of auto claims declined 25.6% during 2020 as the pandemic limited driving activity for many businesses, the average payment for auto accidents increased 4.3% over that same period.


According to the Council of Insurance Agents and Brokers (CIAB) Q2 2021 Rate Survey, General Liability rates rose 6% on average in the first half of 2021, though increases were steeper for businesses in high-hazard industries – manufacturers of tough products, habitational real estate owners and operators, and companies with material wildfire exposure (utilities and forestry concerns). 


The frequency of severe ($15 million+) liability losses is also expected to continue to grow as a result of social inflation, which is the phenomenon of increasing claims costs due to changing societal factors, such as legal advertising, litigation financing, the appeal of class action lawsuits and growing public distrust of corporations.


By contrast, workers’ compensation and high excess casualty are stabilizing and attracting reinvigorated insurer competition.

how to avoid skids

Risk Management: How to Avoid Skids

One of the most dangerous winter driving hazards is skidding. If it happens at a high speed, the result can be deadly. Most skids can be avoided by simply adjusting to driving conditions and knowing how to recover from a skid. 


Skids are most likely to occur on curves and turns, so slow down ahead of time to prepare for them. Then, when in the curve, accelerate slowly and steer steadily with no abrupt change in direction and no abrupt braking. Driving smoothly, in general, can help prevent skids.


Skid Safety Techniques

If you go into a skid, remember two critical rules: 

  • Don’t steer against the skid
  • Avoid using the brakes


Instead, immediately take your foot off the accelerator and steer in the direction the vehicle is sliding until you feel recovery of traction, then slowly straighten the wheels until you recover complete control. If the back of your vehicle is fishtailing to the right, turn the wheel gently in that direction until your car recovers. 


If braking is necessary before traction is recovered, apply the brake pedal cautiously so you do not lock the wheels and intensify the skid. You will have better brake control in a skid situation if your vehicle is equipped with anti-lock brakes. 


It’s important to be constantly on the lookout for areas that might induce skidding, such as unexpected ice patches or piles of wet leaves, which tend to be found in shady areas or on overpasses. Keep in mind that wet ice warmed by the sun is twice as dangerous as completely frozen ice. Be especially alert whenever there is any kind of precipitation during cold weather.


General Winter Driving Tips

Since accidents are common in winter, it’s good to be extra cautious while driving. Drive at reduced speed on slippery roads and increase following distance behind the vehicle ahead – this gives an additional space cushion for safe stopping. Because winter driving can be risky, it is also a good idea to practice driving in slippery conditions so you are well-prepared and comfortable. 


A safe stop on icy or snow-packed roads is a tricky maneuver that requires skill and good judgment. Anticipate stops by slowing down gradually and well ahead of intersections to allow more than enough time to stop safely.


You can also plan ahead of time for lane changes – check your rearview mirror and blind spots then signal your move with the smallest possible steering change and with a light foot on the gas. When you drive into deep snow, stepping on the gas may cause the wheels to spin with little, if any, forward movement. In such cases, avoid over-accelerating. A light foot on the gas pedal and a high gear is most effective. 


Ensure Your Safety 

Whenever you will be driving in any weather, be sure your vehicle is properly equipped. Your brakes should be functioning correctly and your tires should be properly inflated with a good tread surface. Sometimes snow tires, and even chains, may be best to help keep your vehicle under control during dangerous winter weather.

employee beneifts

Employee Benefits: New Benefits Compensation Disclosures Coming Soon

The Consolidated Appropriations Act (CAA) was signed into law in late 2020 and contains several provisions related to business transparency. As part of the CAA, beginning with renewals on or after December 27, 2021, covered service providers (CSPs)—i.e., insurance brokers—must disclose all compensation to clients if they expect to receive $1,000 or more in direct or indirect compensation for providing their services. This means employers will be able to see exactly how brokers earn money, which can help inform plan decisions.


Brown & Brown Northwest Employee Benefits customers will receive these disclosures beginning with the January 1, 2022 renewals. Generally, the notice will be received as part of the renewal confirmation process. Because of late rulemaking, disclosures for January renewals will be distributed by March 1. The disclosure will list each source of compensation, who is providing the compensation (for example, carrier commissions or client fee agreements), and the estimated amount of commission.


Reach out to our team to learn more about these and other upcoming health reform rules, including disclosure obligations.

personal lines

Personal Lines: Homeowners Insurance and the Rising Cost of Building Material

Before you rent a car, it’s worth reviewing the coverage on your personal auto insurance. When you rent a vehicle, coverages from your existing auto policy will likely extend to the rental vehicle as if it was your own so it’s important to contact your agent to discuss your current coverages. For some, the additional rental car coverage is a necessity while for others it may be redundant.


Let’s look at the difference in rental car insurance options. Here are the areas of coverage that are needed:

  • Liability Coverage
  • Collision/Loss Damage Waiver
  • Personal Effects Coverage 
  • Personal Accident Coverage 


Liability Coverage

  • Liability coverage helps cover the costs of the other party’s property damage and bodily injuries for accidents when you are at fault
  • Review your liability limits to ensure you have sufficient coverages


Collision/Loss Damage Waiver

We highly recommend consideration of this coverage!

  • A collision/loss damage waiver (CDW or LDW) provides coverage if you damage a rental car, except in cases of speeding or driving on unpaved roads
  • A CDW may duplicate your existing comprehensive and collision coverages, however, your current deductible would not apply if you purchase this waiver
  • Because this is technically not an insurance policy, damages to the rental vehicle would not be reported to the insurance company as a claim – in most cases, you can just drop off the keys and walk away
  • A rental agency could charge you for “loss of use/loss of rental income” while the vehicle is in the shop being repaired so read your rental agreement carefully to clarify what kinds of charges you could incur if you were to damage their vehicle


Personal Effects Coverage 

  • Personal effects coverage may help cover your personal belongings if they are stolen from the rental vehicle
  • The items are generally covered under a homeowner or renters’ policy “off-premises coverage,” but the deductible of that policy would apply – check with your agent on the limits and terms of your coverage


Personal Accident Insurance 

  • Personal accident insurance helps pay for medical bills for you and your passengers if you’re injured in a rental car accident
  • Some states’ health insurance, medical payment, or personal injury protection may already provide coverages comparable to what the rental company offers


When is rental car insurance a good idea?

  • You don’t currently have insurance – most states require at least liability coverages and if you only have commercial liability, in most cases they will not extend to a personal rental vehicle
  • Your current policy does not have comprehensive and collision coverages
  • You carry a high deductible and don’t want that high deductible applied to the rental
  • You are concerned about damages to a rental vehicle impacting your personal insurance/reporting to the insurance companies
  • You plan on traveling abroad


Before renting a car, you can also check with your credit card company for additional benefits available. Some companies provide collision deductible waivers or will provide coverages for “loss of use/loss of rental income”. And again, always contact your agent to discuss whether your current coverages are adequate.


Surety: Accountable Care Organization Bonds

Accountable Care Organizations (ACOs) must establish a repayment mechanism when participating in a two-sided shared savings program to assure Centers for Medicaid and Medicare Services (CMS) that they can repay losses where they may be liable. An ACO’s repayment mechanism must equal at least 1% of its total per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiaries, based on expenditures used to establish the ACO’s benchmark. CMS accepts letters of credit (LOC), cash held in escrow, and/or a surety bond.


Surety Bonding Benefits 

Surety bonds are a tailored solution to help meet your individual company needs. We help to avoid tying up capital for companies that have been around for more than three years and keep rates competitive and consistent. 


If you are a new ACO, we make the process easy with low requirements and no complicated financial paperwork. We look to execute and approve bonds quickly once we receive an application. 


Alternatives to Letters of Credit 

An LOC ties up the company’s credit capacity, thus reducing financial flexibility whereas surety bonds are not credited against a company’s bank line. Banks may also place restrictive covenants on the customer in return for extending a bank line of credit or they may require extensive financial reporting. Surety companies typically offer more flexibility. 


Banks may also choose to take a security interest in the customer’s assets. This security is required to be perfected through the filing of public documents (UCC filings) that publicize their secured lender status. A surety is generally an unsecured creditor and a UCC filing is rarely made.


Low Requirements 

Whether you have been with the organization since the ACO’s inception or you are just starting out, we ask for minimum information and only what is required to put a bond in place. For instance, bonds under $2 million only need in-house financials to meet application requirements and our application is designed to be one page long to quickly fill out the necessary information.


Quick Delivery 

Brown & Brown works quickly to get your surety bond to you and your business. Once a bond is approved by our surety carrier partners, we can have the physical copy in your hands within 24 hours. We have worked in the ACO industry since its’ inception and work with every size ACO, regardless of how long they have been in the industry.

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