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Q2 2024 Commercial Insurance Trends: How the Market Will Impact Your Business Coverage

By September 4, 2024No Comments

The Q2 2024 property and casualty market survey from the Council of Insurance Agents & Brokers (CIAB) shows rate moderation in many lines. CIAB reports that commercial property and casualty insurance premiums were up 5.2% across all account sizes and all lines of coverage in the second quarter of 2024.

This is the 27th consecutive quarter of rate increases. However, it’s also the smallest rate increase in some time. In comparison, rates were up an average of 7.7% in the first quarter of 2024 and 11.7% in the third quarter of 2020.

Although insurance premiums are still increasing overall, some lines are stable or even experiencing rate decreases. Below, we take a closer look at premium trends and how they may impact your business.

Sector-Specific Business Insurance Premium Trends

Some lines continue to experience fairly steep price hikes, including commercial auto and commercial property insurance. However, compared to the first quarter of 2024, even these lines showed some price moderation.

In addition, a few lines are seeing rate decreases. Notably, prices in the cyber insurance market in 2024 have cooled considerably, with rates coming down in the second quarter. This is somewhat unexpected because ransomware and cyber claims increased in 2023, but survey respondents said increases in capital and capacity have helped improve competition and keep prices down.

D&O liability insurance, EPLI, and workers’ compensation rates were also down. The decline in workers’ compensation follows a recent trend of falling prices, whereas the drop in D&O liability insurance is a reversal of the hard market of recent years.

Overall, the CIAB report shows considerable variation by line in the second quarter of 2024:

  • Commercial Auto: +9.0%

  • Commercial Property: +8.9%

  • General Liability: +5.1%

  • Umbrella: +7.2%

  • Business Interruption: +5.0%

  • D&O Liability: -1.0%

  • EPLI: -0.1%

  • Cyber: -1.7%

  • Workers Compensation: -2.2%

Regional Commercial Insurance Trends 2024

In addition to variation by line, there has been some variation by region.

These differences were notable in commercial property insurance, where natural disaster losses vary considerably with region. Across all regions, only 4.88% of respondents reported commercial property insurance premiums increases of 20% or higher. However, in the Southwest region (which includes Southern California, Arizona, New Mexico, Oklahoma, and Texas), 33.33% of respondents reported commercial property insurance increases of 20% or higher.

Impact of Technology on Property and Casualty Insurance

Technology is having a notable impact on the property and casualty insurance market, in terms of both risks and insurance processes.

When asked about technological threats, 30% of CIAB survey respondents cited cyber risk as a top client concern. This may be well founded: although cyber insurance costs are down, losses seem to be increasing. In addition to ransomware and other types of cyberattacks, businesses need to consider cyber events, such as the CrowdStrike IT outage, which was caused by a faulty update. This may be a good time for business leaders to assess their cyber security protocols and backup plans and to consider purchasing additional insurance coverage.

In terms of technology in insurance processes, AI in insurance underwriting has been taking on a new level of importance. Multiple respondents to the CIAB survey reported that carriers were finding new ways to leverage technology in commercial property assessments. For example, carriers may use AI sources or even Google to find data to inform underwriting decisions.

Although this should result in more efficient underwriting processes (at least in theory), not all brokers report positive results. In fact, according to CIAB, some brokers say growing dependence on AI in underwriting is producing subpar results for renewals and new business.

Top Concerns and Challenges in 2024

Although cyber risks were a common concern, they did not make the list of the top three client concerns for the second quarter of 2024, according to CIAB respondents. The top three were:

  • High current premiums (74% of respondents)

  • Future premium increases (72% of respondents)

  • Limitations on coverage (63% of respondents)

It’s clear that, although price increases have moderated, business leaders are still feeling the financial strain of recent premium hikes and coverage restrictions. Although the most recent figures should provide some relief for business owners, insurance challenges are far from over.

As business leaders navigate their upcoming insurance applications and renewals, they should do the following:

  • Consider taking advantage of rate moderation to increase coverage. With lower rates available, now may be a smart time to increase cyber insurance and D&O coverage. Businesses may also look at increasing coverage for commercial property and business interruption insurance to offset rising risks.

  • Work with an experienced broker. With insurance underwriting shifting due to increased use of technology and changing risk appetites, an experienced broker will be valuable as an advocate for businesses and for helping position them for success.

  • Be proactive. For businesses to take control of risks, insurance needs to be a priority year-round, not just in the weeks before renewal. Focus on managing risks throughout the year to prevent claims and to make yourself attractive to insurers. You should also begin working with a broker well ahead of your renewal.

Watkins Insurance Group can work with your organization to understand your insurance needs and position you for success. Reach out to set up an appointment.