James F. Mahoney, Attorney

April 2013

The Rise of Commercial Insurance Rates and What to Do About Them

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Commercial insurance prices rose more than 5% during the first quarter of 2013. This is on top of a rise of about 9% in the second half of 2012.

If your renewals have already gone through this year, you know the pain and increased expense this has caused. Risk and claims are an increasing charge against revenue.

If your renewals are coming up in the second half of 2013, you can do only a little right now. You can conduct some active and aggressive claim reviews and try to mollify underwriters with plans to mitigate adverse loss ratios next year. Our risks are long-tailed beasts, so you need to plan years ahead. The commercial market may not soften again until several years of underwriting profits make carriers hungry.

As the economy comes out of recession – assuming it is making its way there – it is very likely that awards and verdicts will be a bit more generous than in the last few years. There are steps to take now to reduce costs and increase net:

  • Know that there are creative and practical solutions to limit risk through transactional insurance work – i.e., right-sizing your retentions and coverage by utilizing active, proper litigation management, paying close attention to your reserves, and addressing problematic reserve forecasting by claims personnel.

  • For certain others, you need to at least consider alternative insurance products. If you have retentions backed by collateral, these last few years' worth of low verdicts should make for a viable argument of reductions in reserves and, therefore, greater collateral efficiencies. (This is not true in workers’ comp, but there are alternatives to that, too, if done properly.)

  • For all of us, we must pay attention to DOT-FMCSA regulatory compliance. Perhaps because of CSA and potentially new HOS regulations and assorted proposed rules in the news, underwriters have a heightened sense that CSA BASIC scores equate to safe operations – and therefore are the only good risks to underwrite. Even our off-shore insurance friends are thinking this way.