Insurance broker and risk management firm Marsh has published its annual report predicting 10 key trends expected to shape the 2017 insurance market. Highlights from the report are noted below.
1. Rapid advance in the development of usage-based insurance (UBI) — which provides coverage on a “need-only basis.”
This, according to Marsh, is a direct result of a more interconnected world, which blurs the boundaries between product liability and cyber insurance. What’s known as IoT — the Internet of Things — may lead insurers to reevaluate their own risk aggregation as well as change how they cover risks associated with connected devices.
One example is the ability to offer safe drivers lower rates due to “internet-enabled telematics” that can track driver behavior. Conversely, the potential for greater loss is vastly increased by all of the interconnectedness since an individual loss can now “ripple through an entire connected system,” leading to “insurer aggregation fears.”
2. Policies will contain more clarifying exclusions that dictate how commercial and personal lines policies cover evolving risks.
This is in keeping with the trend of cyber exclusions contained in commercial general liability (CGL) policies.
The intent is to “eliminate some combination of intangible property damage, nonphysical damage, and advertising or personal-related liabilities that were not originally contemplated by CGL policies,” according to Marsh.
Policy language and endorsements clarification will address evolving risks to include drones, driverless cars, 3D printing, genetically modified organisms (GMOs) and the sharing economy. Marsh predicts that insurers will also push for more clearly defined coverage language for traumatic brain injury and other emerging exposures.
3. More competitive solutions and products to better meet the demands of the sharing economy and on-demand services companies.
Marsh anticipates a broad expansion of InsurTech companies — those that use innovative technology to compete in the marketplace by targeting the insurance industry’s current inefficiencies.
The industry’s “underwhelming response to the sharing economy” has provided fertile ground to InsurTechs, which tout the ability to offer coverage to better meet consumers’ fluid needs by using technology to more accurately gauge underwriting accuracy and loss prediction.
4. More aggressive underwriting.
Despite a nearly 10-year trend of insurers focusing on underwriting profitability (read: conservative underwriting) over premium growth, Marsh says there is increased aggressiveness in the marketplace even though there are signs that “underwriting results are deteriorating and inflationary claim trends will not be offset by rate.”
There’s fierce competition for market share and growth between insurers trying to break into the market and those who have dominated the industry. So despite ballooning medical costs, automobile damage and claim settlement values, underwriters are starting to become more aggressive.
The end result could be marked volatility for certain product lines or industry segments, according to Marsh.
5. Consolidation of personal and commercial auto insurance and products liability.
In preparation for driverless cars making their way to market, as well as coverage accommodations for ride-sharing and emerging transportation networks, strides will be made to consolidate personal and commercial automobile insurance and products liability.
Until there is data to predict whether these technologies will result in fewer auto accidents, there will likely be gaps in coverage until policies are adjusted to reflect the “liability landscape.”
Products liability will supersede automobile liability “as component parts with the potential for defect allegations take over for humans.”
6. Insurers will push for higher casualty rates.
Marsh surmises that the need to expand margins accounts for this forecast. While the insurance industry has enjoyed record-high surpluses — more than one dollar for every dollar at risk — competition from “downward rate pressures” and market newcomers is squeezing margins.
However, a rise in interest rates could offset the need for insurers to increase certain casualty product lines.
7. Technology advancements will result in improved loss ratios, analytics, claims handling and workplace safety.
Emerging technologies such as wearable devices, sensors and dashboard technologies will “lead to commercial insurance sensor applications improving both property and casualty loss profiles” and allow the insurance industry to improve the aforementioned segments, Marsh predicts.
8. Increased underwriting scrutiny from a coverage perspective.
The increase in digital analytics will help underwriters better analyze coverage differences. Marsh says the modern insurance market will be more about coverage (differentiating program choices) than about price.
“Different cyber, punitive damage, and dispute resolution mechanisms will carry more weight in 2017 than ever before,” according to Marsh.
9. Increased purchases of excess liability limits.
A combination of insurers’ savoir-faire with underinsured losses and “nuclear verdicts” in the auto and product liability categories and “sophisticated analytical tools to quantify the likelihood of a loss greater than the current excess liability limit purchased” will result in consumers beefing up their coverage limits.
10. A more favorable workers’ compensation market for buyers from a risk transfer premium and rate perspective.
This prediction can be attributed to the continued shift from traditional working hours and 9-to-5 fixed employment locations to part-time, on-demand and independent contractors.
This phenomenon complicates how employers will implement safety procedures as well as how best to deliver timely and quality medical care to injured employees, according to the Marsh report, which also notes the conundrum employers face in determining who is covered under workers’ compensation policies offered to employees.
Bill Hager’s Experience as an Insurance Expert
Insurance expert witness Bill Hager has extensive and substantive experience relating directly to wide range of insurance policies, including interpreting policy language and determining the insurer’s obligations under such policies. He served as a regulator for eight years in five positions:
- Commissioner of Insurance (Iowa);
- First Deputy Commissioner of Insurance;
- Member of the National Association of Insurance Commissioners (NAIC);
- Administrative Law Judge f/k/a Hearing Officer at the Department of Insurance (IA); and
- Assistant Attorney General assigned on a full-time basis to the Department of Insurance.
In these positions, Mr. Hager, along with his staff, approved (or disapproved) of the language of insurance policies used by each of the insurance companies doing business in the state of Iowa. This regulatory action also included the approval of policy application forms. In addition, he regularly served as an Administrative Law Judge (then known as a “Hearing Officer”) in matters relating directly to insurance policies.
While Commissioner, Mr. Hager also served as a member of the National Association of Insurance Commissioners (“NAIC”) and participated as a member of its Executive Committee.
In addition, Hager has served in the following capacities:
- President and Chief Executive Officer of NCCI, a major property casualty insurance entity;
- Elected Member of the Florida House of Representatives with service on the Insurance Committees;
- General Counsel and Chief Lobbyist to the American Academy of Actuaries;
- Attorney in private practice;
Click on the link to read more about Mr. Hager’s insurance expertise.
Material for this article was taken from a collection of industry sources relating to the subject.
In all of the general statements here, see the state law of the controlling jurisdiction. Every case is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.
This blog is provided for educational purposes only. It is not intended to provide legal advice or an opinion in regard to any topic discussed. The blog should not be used as a substitute for legal advice from a licensed attorney in your state.