A recent survey of nearly 1,000 independent agents and brokers conducted by the Independent Insurance Agents of America (IIAA) and the Alliance of American Insurers (AAI) confirms the problems the insurance industry is having placing terrorism insurance coverage for commercial clients.
Agents and brokers surveyed reported that:
a large percentage of companies are excluding terrorism coverage,
their commercial clients are contacting them about terrorism insurance concerns,
terrorism coverage is becoming increasingly unavailable, and if it can be found, the price is causing most clients to choose to go without terrorism coverage, and
the limited amount of terrorism coverage that is available is largely being placed in non-standard markets.
The survey explores the extent that coverage exclusions for terrorist acts are being placed on policies and how they are being applied. IIAA and AAI also sought information about the availability and pricing of terrorism coverage.
“This survey validates what our member agent and brokers have been saying for several months,” IIAA CEO Robert A. Rusbuldt commented. “Since Sept. 11, the market for terrorism insurance coverage has constricted considerably, but anecdotal information has not swayed opinion in the Senate on the need for a federal backstop. The IIAA-AAI study gives Congress clear evidence that there is a problem in the marketplaceaffecting commercial enterprisesthat is going to get worse without a legislative remedy.”
“Yesterday (April 8), President Bush did an excellent job of addressing this issue as he cited several examples of large, high-profile projects that are not getting done because of a lack of terrorism insurance,” Alliance President Rodger S. Lawson said. “This survey clearly shows that the problem goes well beyond those high-profile projects and extends to businesses across the country. It’s an economic issue and a jobs issue that stretches from Wall Street to Main Street.”
In the survey, agents and brokers reported that 80 percent of insurance companies have excluded or have indicated that they will exclude terrorism coverage in their commercial (business) policies. Since the terrorist attacks, many reinsurance companies ceased offering terrorism reinsurance, making it harder for both primary insurance companies and agents/brokers to provide coverage for this risk. As a result, business clients either are without terrorism coverage or paying significantly higher premiums for it.
The survey found that deepening terrorism insurance anxiety is leading many business clients to ask their agent or broker for assistance. Nearly 20 percent of agents and brokers reported that their business clients are calling with concerns and questions about terrorism coverage. When terrorism insurance coverage can be located, however, seven of 10 agents and brokers said that nearly all of their clients decline coverage because it is too expensive.
“These findings illuminate the dual problems of availability and affordability that agents and brokers and their clients are facing every day,” Rusbuldt said. “It’s a double-edge sword: Terrorism insurance is hard to find and when found it is beyond the financial means of most business clients. This quite simply is a survival issue for many business owners. Without affordable terrorism coverage, some businesses will be forced to close their doors, construction projects will not be built and jobs will be lost.”
In many cases where an agent or broker is able to locate terrorism coverage for their client, the protection is secured in non-standard markets because coverage is not affordable or available through standard insurance companies. As a last resort, agents and brokers reported they are placing business policies through excess and surplus lines markets, risk retention groups, self insurance, residual markets and special products offered by standard providers.
IIAA and AAI have informed the White House and congressional leaders of the survey results. During a meeting at the White House earlier in the week, the President called on the Senate, which has not approved a terrorism insurance backstop measure, to act before terrorism insurance availability and affordability drag the economy back into recession. He cited examples of terrorism insurance problems and told the labor and business leaders that terrorism insurance is a big jobs issue.
“Insurers want to sell policies,” Lawson commented. “They don’t want to turn down business. It’s hurting the insurance companies and their agents. But most of all, it’s hurting their customers, the businesses that are the engine of the American economy. The Senate has the ability to end this problem and they should resolve their differences and act.”
The survey was conducted online between Feb. 22 and April 3. A total of 957 independent insurance agencies and brokerage firms of all sizes and from all areas of the country completed the questionnaire.
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