Importance of Client Education Amid Rising Insurance Premiums

The latest industry reports on the insurance market are coming out, all indicating that insurance premiums continue to rise. For example, the most recent report from The Council of Insurance Agents & Brokers indicates that premiums increased by an average of 11.7% across all-sized accounts. The impact from these price increases was most apparent for large and medium-sized accounts, which recorded increases of 15.3% and 12.7%, respectively. Small accounts experienced an average increase of 7.1%, slightly lower than the 7.3% increase in Q2 2020.

In addition, premiums continued to increase for all lines of business in Q3 2020, Workers’ Compensation included. Umbrella and Directors & Officers (D&O) premiums increased by far the most in Q3 2020, at 22.9% and 16.1%, respectively, followed by Commercial Property with an increase of 14.2%, according to The Council report.

The latest Willis Towers Watson’s 2021 Insurance Marketplace Realities report also indicates that commercial insurance prices are expected to increase going into next year.

Let Clients Know Why Premiums Continue to Rise, Market Continues to Harden

Armed with this type of information, it’s imperative that insurance brokers and agents keep their clients in the know of the continued rising of insurance premiums and the reasons behind rising prices. The last thing you want is an unhappy insured who experiences sticker shock when his or her insurance program comes up for renewal. Client education throughout the year is key in keeping buyers informed about the cyclical nature of the insurance market, what it means to be in a hard market, and how you are navigating this landscape to obtain favorable pricing and coverage terms. With ongoing communication, you can help dispel a client’s dismay at receiving premiums that have increased anywhere from single to double digits depending on the size of the operation, location, and coverage line.

Client education can take the form of phone calls (way ahead of the renewal) and emails with links to blog articles and white papers. There are plenty of resources available to put together an article or white paper.

Review the Key Factors Impacting the Insurance Market

Be clear and concise in communicating what’s taking place in the insurance market – from rate increases to reductions in capacity, tighter underwriting guidelines, and changes in coverage terms and conditions.   Explain the primary factors driving the hard market, including social inflation and nuclear verdicts along with consistent underpricing for years in certain lines. Natural catastrophes such as hurricanes and wildfires have driven up premiums in the Commercial Property insurance market.

COVID-19 has also impacted an already hard market. “The financial stress from the extended economic contraction has contributed to increased premium pricing across the board, heightened insurer wariness and reluctance to take on additional risk,” said Kevin Crear, president/CEO of The Council. Educating your insureds on the insurance market will go a long way in eliminating surprises, understanding the marketplace, and in retaining clients. Clients look to you for information and transparency as their trusted advisors to help them through challenging times.