Bruce Newsom in Property Insurance January 22, 2018

We get a lot of questions about the direction of the insurance market, especially for the business side of property and casualty insurance.

We are posting a video below which is very well done and explains 2018's estimated market direction.  The presenter is Robert Hartwig, a professor at University of NC in the fields of economics, risk and insurance.  He confirms everything we see on the market.  The insurance industry has been sitting on a fair bit of cash for a few years, but 2017 events have drained quite a bit from their buckets of money.  Much like a banker, insurance underwriters are dependent upon cash.  As a bank can loan money more easily and at lower rates when they are sitting on mountains of it, insurance companies can take on your risk more easily and at lower rates when they have lots of cash to offset that risk. 

As capital drains, rates can rise and coverage conditions can sour.  Since the industry has been flush with cash in past years, 2017 will hurt but not too badly.  Contrary to public opinion, the industry returns have not been great lately and they are making very little underwriting profit.  Therefore, I do expect rates to rise a bit and perhaps deductibles to rise.  However, I only see 2-5 points of increase and not the 5-9 points Professor Hartwig forecasts in his video. Please keep in mind, your claim history will drive this too; those with more claims will suffer great rate increases. With this in mind, now is a great time to focus attention on loss prevention to control losses. Let us know if we can help you in this area [of risk management].