2023 Insurance Market: What’s Happening in Commercial and Personal Insurance?

Factors that impact insurance carriers – like inflation and natural disasters – can also impact your premiums and coverage terms. Before your next renewal or application, read up on what’s happening now in commercial and personal lines.

Key Issues Impacting Coverage

Insurance underwriters need to consider a vast array of factors when determining rates and coverage terms. These factors can change over time as new risks emerge and develop. Right now, the following are some of the biggest issues impacting rates across personal and commercial lines.

Inflation: Property lines – including homeowners, auto, and commercial property insurance – have been feeling the impact of inflation. With supplies and labor costing more, construction costs have surged. This means claims also cost more. As a result, many policyholders may be severely underinsured. A survey from the American Property Casualty Insurance Association found that only 30% of insured homeowners have increased their limits to compensate for rising costs.
Natural Disasters: Columbia Climate School says natural disasters are becoming more frequent and costly due to climate change and more development in areas close to forests with high wildfire risks. This is causing challenges for insurance companies. California has been especially hard hit – AP News reports that both State Farm and Allstate are pulling out of California’s property insurance market. Natural disasters have also impacted the construction market. Business Insurance says construction insurance rates have increased and deductibles have become larger in recent years as a result.
Geopolitical Instability: Global conflicts can impact risks in a number of ways, from property damage and cyberattacks to inflation and supply chain snags. According to S&P Global, fallout from the COVID-19 pandemic and the Russia–Ukraine conflict have contributed to changes in global structures, whereas impending economic downturns have put the world economy in an precarious position.
Cyberattacks: According to Bloomberg, cyber insurance premiums surged by 50% in 2022 amid an increase in ransomware. Although cyberattacks have the most obvious and direct impact on cyber liability insurance, cyber trends can also impact other lines, such as D&O insurance.
Liability: Back in 2021, Business Insurance reported that general and excess liability rates were increasing in response to increasing litigation funding and larger court awards. These continue to be issues. Third-party litigation funding is frequently the culprit – according to the Insurance Information Institute, third-party litigation funding can draw out litigation and increase costs.
Demand: As with any other product, supply and demand impact insurance. Property Casualty 360 says D&O rates are dropping as demand decreases amid economic factors and lower deal activity. Meanwhile, Research and Markets says U.S. construction activity is expected to grow over the next four quarters.
Labor: Many industries have experienced tight labor markets and a shortage of skilled workers, which can impact risks. According to Property Casualty 360, construction in particular requires skilled workers to avoid complications. A lack of skilled workers is therefore a problem for construction insurance underwriters.

The Personal Insurance Market

According to MarketScout, personal lines insurance rates were up 5% in the first quarter of 2023 – a rate change that indicates moderation. Rates for homes with a value under $1 million were up 5%, rates for homes with a value over $1 million were up 6%, and auto insurance rates were up 6.3%. Individuals may have different experiences. In areas with catastrophe exposures, for instance, some property owners are facing significant rate hikes and more limited coverage.

The Commercial Insurance Market

According to the Council of Insurance Agents & Brokers (CIAB), commercial rates were up 8.3% across all major lines in the first quarter of 2023.

In 2021 and 2022, some of the largest rate hikes were in cyber liability insurance. However, in the first quarter of 2023, cyber rates were only up 8.4%. That may still seem like a steep hike, but it’s low compared to the average rate hike of 34.4% of the fourth quarter of 2021.

On the other hand, commercial property insurance rates have surged. In the first quarter of 2023, commercial property rates were up 20.4%, which was the highest of any other line.

There has also been variation in rate hikes and coverage terms by industry. CIAB says construction lines were up an average of 7.8% in the first quarter of 2023. According to MarketScout, the transportation sector saw rate hikes of 8% in the first quarter, whereas contracting saw rate hikes of 5%.

The insurance market is always changing, but an insurance broker can help you navigate the 2023 insurance market. For help securing personal or commercial insurance in the New York tri-state area, count on BNC Insurance and Risk Advisors. Contact us.