Most Commercial Insurance Buyers Accept Coverage Changes, Price Hikes: Survey

The vast majority of commercial insurance buyers renewing their policies appear willing to accept coverage adjustments, moderate price increases, or both, according to a new survey.

Still, the survey of risk managers and other corporate insurance buyers by Hanover Stone Partners finds some firms looking for ways to sidestep higher premiums by adjusting retentions, accepting restrictive policy wording, or changing their insurers or brokers.

“In the face of modest price increases, most buyers are choosing to maintain both their level of insurance protection as well as their relationships with incumbent insurers,” said John J. Kelly, managing partner, Hanover Stone Partners, a Jersey City, New Jersey-based network of risk management advisors and specialized risk management services firms. “Should pricing continue to rise, however, we may see more buyers looking for alternatives, both in terms of program structure and their insurance providers.”

The survey was conducted during the third quarter of 2012. The results are based on responses from approximately 5 percent of the Fortune 500 that renewed their insurance policies.

Among the casualty insurance lines, half the buyers saw their general liability premiums rise by 1 to 5 percent, one in 10 saw increases of 6 to 10 percent, three in 10 had flat renewals, and one in 10 saw rates drop by up to 5 percent. Nine in 10 made no changes to their program, while one in 10 changed brokers.

In auto, one-third of the survey participants saw rate increases of 1 to 5 percent, one in eight (12 percent) saw increases of 6 to 10 percent, one-third had flat renewals, and one in five (22 percent) saw rates drop by over 15 percent. While more than three in four (78 percent) made no change, 11 percent changed brokers and the same percentage changed insurers.

Nearly six in 10 (58 percent) reported their workers’ compensation insurers sought rate increases that ranged up to 10 percent, while 14 percent had flat renewals, and 28 percent saw rates drop by 6 to 15 percent. While three in four made no changes, 13 percent changed brokers and an equal portion changed insurers.

In umbrella and excess liability, 70 percent renewed their coverage with rate increases ranging as high as 15 percent, one in five had flat renewals and one in 10 saw rates decrease by as much as 15 percent. Among the buyers, 30 percent changed insurers while 70 percent left relationships unchanged.

With respect to property, 57 percent reported their insurers were willing to renew all-risk primary layers with terms and conditions “as expired”; however, 29 percent sought to impose higher retentions or deductibles and 14 percent sought both more restrictive terms and higher retentions. While 14 percent of buyers agreed to the more restrictive terms, an equal percentage changed retentions or deductibles. Most buyers (72 percent) saw premiums rise on their renewals with 14 percent experiencing increases of more than 15 percent.

In the all-risk excess layers, half the buyers indicated their insurers were willing to renew these programs “as expired” with respect to terms and conditions, all reported being charged higher premiums and one in three saw their rates rise by 15 percent or more.

While nearly one in 10 buyers of directors and officers liability (D&O) indicated their insurers sought higher retentions or deductibles on renewal, 55 percent experienced rate increases of as much as 10 percent. Nearly one in five (18 percent) saw their rates decrease by up to 5 percent.

Among EPLI buyers: 54 percent saw rates increase from 1 to 10 percent and just over one in four had flat renewals. Meanwhile, one in five had rate decreases, with nearly one in 10 seeing rates drop by 15 percent or more.