What’s To Come…
Insurance Rate Increases
“The
recent World Trade Center disaster, adverse claim experience, inadequate rates,
“loose”
underwriting and in some cases, higher claim reserve requirements have
caused a market that is hardening beyond most
predictions.”
-
William L. Granahan (Milliman USA)
“In
its Insurance Market Overview for 2002, the insurance broker (Willis) predicts
that
premium rates will rise 30% to
40%.”…”Workers’ compensation, already under pressure
due
to increasing claim severity and deteriorating underwriting results, may now
face
price increases, carrier demand for higher
deductibles and a change in underwriting strategy.”
-
David Pilla (Best Wire Services)
“The
World Trade Center loss marks a profound watershed for the insurance and
reinsurance
industry, according to Clement Booth, a member of the board of directors
of Munich Reinsurance Co.” Juergen Graeber of
Hannover Reinsurance Co. says
“We
will be making requests for our customers to go back to the technical rating
levels
of
1994. Depending on the degree of rate
cutting since then, for some segments of the
market, this could mean an increase of 40% to
60%; other will see increases as much
as
200%.”
-
Carolyn Aldred (Business Insurance)
So What Does All This Mean?
Rate Increases - Higher Deductibles - Less Coverage on Policies
ü
The
insurance and reinsurance markets were already hardening before September 11th.
What
would have been 10% to 20% rate increases now will be 30% to 60%.
ü
Companies
will be more comprehensively assessed for risk. Underwriting will be
more extensive, past history (EMR’s) will play a
bigger role, loss control programs will
no longer be recommended – they will be required.
ü
Companies
that are proactive in controlling losses will not necessarily be greatly rewarded,
but they will not suffer the
same punishment as companies with uncontrolled risk exposures and losses.