Insurance Stance at a Glance

First, we want to recognize that the social worker profession is noble and founded on service, integrity, and clinical expertise. At times, it can be a stressful and hazardous occupation. The nation is grateful for what you do. AND SO ARE WE! Thank you!

Here is the key takeaway of this article.

2024 brings premium price increases, elevated claims expense, higher jury awards, and reduced coverage benefits.

Let’s recap what happens in the U.S. property and casualty insurance sector. According to Swiss Re Institute, January 9, 2024, by Thomas Holzheu, Chief Economist, and James Finucane, Senior Economist, the following are key highlights:

• The U.S. P&C insurance industry enters 2024 with strong momentum.
• Higher investment returns on reserves will result from rising inflation and Fed funds rate hikes to combat it, thus increasing investment yields. Investment yields were 3.5% in 2023 and are forecasted to be 3.7% in 2024 and 4.1% in 2025.
• Real U.S. GDP growth, a claims loss exposure proxy, is forecast to grow by 1.1% in 2024 and 1.9% in 2025.
• Combined premium growth for all P&C lines is forecasted to be 7.0% in 2024 and 4.5% in 2025. An indication of premium hikes to cover claims loss increases and growth policy sales among specific occupational segments.
• Medical professional liability loss ratios remained flat at 55.9%, but this statistic is deceiving.

Market observations by Preferra Insurance Company, Risk Retention Group, indicate that loss ratios remained flat because carriers declined coverage in many high-risk medical professional liability classes, increased premiums in certain medical professional liability classes deemed as high risk, and trimmed their liability policy coverages overall by rising deductibles, lowering sub-limits on specific claims categories, and infusing more policy exclusions—a comprehensive “watering down” of professional liability coverages and declining coverage altogether.

Fitch Ratings, Outlook report “U.S. Property/Casualty Insurance Outlook 2024, December 11, 2023, published their highlights:

• Claims cost upward volatility from inflation, increased litigation, macroeconomic uncertainty (including social justice jury awards), and increased underwriting risks.
• The industry return on investment surplus is projected to remain below historical performance and increase to 5% in 2024 versus 3% in 2023 due to high inflation and Fed funds interest rate hikes to combat inflation.
• Combined premium growth in commercial liability lines was primarily due to property lines’ premium growth with weak or negative premium growth in commercial liability lines. 2023 premium growth was 7.5% and is forecasted to be 5.5% in 2024.

KPMG forecasts a 10% premium overall general rate hike in 2024. The supporting reasons are that legal defense fees are increasing due to attorney hourly rates, higher lawsuit settlements, higher indemnities paid, adjudication claims cost increases, and rising supply chain reinsurance costs that have “consumed all the premium increases insurers have charged during 2023”. (Insurance News.com.au – July 10, 2023)

According to “New WTW Report Unveils Insurance Pricing Predictions for 2024” by Ken Araullo, November 28, 2023:

• Most coverage lines are experiencing price increases.
• There will be single-digit price increases in premiums.
• General Liability premium increases will spike to 4%.
• Professional Liability premium increases will spike to 10%.
• The Cyber Liability premium increase will be 5%.
• The insurance market will move to a “harder condition” with more policy purchase application declinations, policy cancellations, premium increases, and policy coverage reductions as reinsurance capacity decreases and loss exposure increases.

In closing, according to Woodruff-Sawyer & Co. “Property & Casualty Looking Ahead to 2024”, “Healthcare PLI Ongoing Rate Pressure Increases,” by Carolyn Polikoff, December 5, 2023, Accenture made the following five predictions for the insurance industry in 2024 on December 27, 2023:

1. Macroeconomic forecasts for 2024 indicate slowing GDP growth and continuing inflationary pressure.
2. Top-line premium for P&C carriers moves with GDP. Growth is expected to slow to 2.6% on average for 2024 and 2025, down from 3.4% in 2023, as many carriers exit certain medical professional liability insurance lines and decline policy renewals altogether.
3. Claims volumes and claims costs across all lines of business remain elevated. Economic inflation combined with social inflation causes this. It has been Preferra Insurance Company Risk Retention Group’s experience during 2022 and 2023 that social justice jury verdicts and growing pre-trial settlement payments spike bloat claims losses. Claims severity increases even though claims frequency remains flat.
4. Insurers increasingly offer a more comprehensive array of services and advice beyond traditional insurance products.
5. As Preferra Insurance Company Risk Retention Group has done for the past ten years, other insurers are starting to offer policyholders instruction in better practice methods to improve service levels, produce better outcomes, decrease claims incidents, and provide peace of mind.

In 2024, be prepared for premium rate hikes and watered-down liability policies, but not from Preferra Insurance Company Risk Retention Group.

Thank you for all that you do! Your profession is genuinely noble and needed now more than ever. Good luck, and stay healthy!