Managing Renewals in a Challenging Market

For more than a decade — starting in the mid-2000s — insurance pricing steadily declined, even amid significant economic and enterprise growth. In late 2017 and 2018, however, commercial insurance pricing started to increase. Moreover, in 2019, the market began a rapid transition driven by an increase in claims severity and frequency.

Pricing increases are now being seen across most lines of business and in most geographies with substantial increases occurring in property, directors and officers liability (D&O), auto liability, and umbrella/excess liability.

With considerable uncertainty about insurers’ ultimate COVID-19 losses and double-digit price increases becoming the norm, we expect the market to remain challenging for some time. All buyers with upcoming renewals should be prepared for greater underwriting scrutiny and a more challenging process. Insurers may be more assertive in denying policy term extensions, paring back coverage and limits, applying exclusions, and scrutinizing claims more stringently.

Despite these conditions, risk professionals can position their organizations to achieve more favorable outcomes at renewal and better manage total cost of risk. Among other strategies, insurance buyers should work with their advisors as they prepare for pending renewals to:

• Manage expectations for senior executives and boards.
• Set a clear strategy before beginning renewal discussions.
• Involve senior leaders in negotiation processes.
• Consider different approaches and solutions.