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2017 Insurance Market Review by Thomas Odom

2017 Insurance Market Review by Thomas Odom

2017 proved to be a tumultuous year for both insurance companies and consumers. Three major hurricanes, flooding, earthquakes, and more than 275 wildfires in California alone headlined what experts predict to be the largest year of catastrophic losses in history. Reported insurable losses are now nearing $150 billion and the total estimated economic impact is close to $500 billion.

As expected after the largest catastrophic year in our modern day history, insurance companies will walk away from some unprofitable accounts, have reduced capacity to take on new accounts, and depend on increased premiums to return to profitability. For the first time in many years, average premiums have increased for consecutive quarters. The reasons behind these measures are claim settlements cutting into insurers’ reserves and increased reinsurance expenses related to business practices.

Despite the call from industry experts for a harder, more expensive insurance market, alternative investment and merger and acquisition activity continue to provide the additional capital needed for insurance companies to pursue growth. The process of being more selective has allowed companies to show a willingness to compete for business through the first initial months of 2018.  

Consumer experiences will widely vary based on if and to what extent organizations or individuals are affected by the aforementioned catastrophes or unrelated claims. The severity of property insurance rate increases should range from flat for those who were unaffected to single digit increases for those in areas exposed to catastrophic events. Entities exposed to losses could experience anywhere from 10% to more than 20% increases in extreme cases. These predictions differ depending on a variety of sources.

An additional increased cost that insurers are experiencing in relation to natural disasters is their auto books of business. Comprehensive claims, those most likely to occur in natural disasters, average $1700 in damages per claim according to the Insurance Information Institute.  Progressive reported $121 million dollars alone at the end of the third quarter in 2017 in comprehensive auto claims.

So what can we do to minimize the pain and achieve our post loss goals?

Be “Best in Class”

  • Proactively invest in maintenance updates and safety equipment
  • Cooperate with loss control recommendations, regulations, and safety practices
  • Create a culture of accountability that rewards employees for practicing good risk management

Consider Alternatives

  • Willingness to take on larger deductibles or self-insurance
  • Partner with the best insurance company for your specific programs
  • Select an agent or advisor who will work to position your business in a positive light

Despite not having control over when and where a natural disaster might occur, preparation and forethought in regards to your insurance needs will provide your business with protection even when faced with uncertain circumstances.

Thomas Odom is a Client Advisor in Sterling Seacrest Partner’s property-casualty insurance practice. Thomas has more than eight years of experience administering property-casualty insurance programs for middle market and large corporate accounts. He can be reached at 912.544.1928 or TOdom@sspins.com.