The Insurance Outlook for 2021

The social work profession is truly a noble 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, thank you!

Insurance premium rate hikes started occurring in late 2018 and continued throughout 2019 and 2020 in what is referred to as the “hard market.” Catastrophic property losses from wildfires, floods, and riot-related property damages were big contributing factors during 2020.

According to the Deloitte Center for Financial Services, Deloitte Insights’ survey of 200 industry leaders reported on December 3, 2020, the pandemic from COVID-19 hurt the property and casualty insurance business significantly. The trend will continue perhaps into Q3 2022. While property losses are the primary premium rate driver, the rate increases bled into the property-casualty insurance category’s liability side, which sustained rate hikes as well, such as malpractice, professional liability, and errors & omissions lines. High-level decision-makers at insurance carriers often blend the performance analytics of several coverage lines when considering losses and rate hikes. In total, just in the first half of 2020, property & casualty insurance companies suffered a drop in return on equity from 8.3% to 2.8% and COVID-19 related losses of $6.8 billion. That is what the CEO’s office looks at, and corrective action always follows.

Financial losses eventually drive insurance companies out of business. The A.M. Best Special Report titled “2019 U.S. Property /Casualty Impairments Update” as quoted by the Insurance Journal, (November 16, 2020, p. – 22), reported that from 2000 to 2019, 388 property & casualty insurers suffered impairments, and 314 became insolvent liquidations. The Medical Professional Liability category ranked as #6 on the top of the impairment list. This is primarily due to large lawsuit cases and social justice verdicts that impact insurance policies with high limits and high sub-limits.

Marsh reported in the Insurance Journal (Ibid, p. – 10) that the “professional lines” product segment, which includes professional liability and malpractice policy coverages, sustained rate hikes of 40% on average during the past year. We see a blending of high limit malpractice losses from doctors with low limit professional liability from social workers.

The Preferra Insurance Company RRG had zero rate hikes in over 40 years, nor do we anticipate any rate hikes on any of the Preferra Insurance Company RRG, insurance lines, and we will continue the NASW member discounts.

Regarding the damaging 2020 year to insurance carriers, trip and events cancellation coverage losses, worker’s compensation losses arising from COVID-19 related massive unemployment, and a variety of small business losses from business interruption and property losses combined to drive down profitability and thus increase premium rates across the board. The life insurance side was also hit with 50% more credit default losses on mortgage loans than the Great Recession reported by Deloitte.

The only property casualty category that remained favorable to insureds is the U.S. auto insurance category. Category premiums decreased because of policy premium rate cuts and rebates from pandemic reduced driving, reduced auto insurance consumer coverage needs, and the associated drop in accident frequency that enriched the carriers.

This is a good time for you to shop around for an auto insurance policy at a lower rate and perhaps get better benefits. Shop around and check the online aggregators for several auto insurance coverage quotes to fit your needs from at least 3 or 4 auto insurance carriers for comparison. You can also check with your bank and credit card providers. Many of these companies own online insurance agencies that sell several auto insurance lines from well-known insurance carriers.

Here is why you should again feel reassured. The Preferra Insurance Company RRG, and its affiliates, the NASW Insurance Company, and Preferra Insurance Company are well capitalized, well managed in all aspects, and carry the “Excellent” A.M. Best rating.

Insurance rate hikes are not in the Preferra Insurance Company RRG’s vocabulary. We have not had a rate hike in our professional liability products in 40 years, nor do we anticipate any rate hikes. You may understandably ask why? We manage the Preferra Insurance Company RRG, expenses tightly, we pass cost savings back to NASW members with comprehensive benefits and discounts, we run claims, administration, and underwriting using the best industry practices, and we answer to the Preferra Insurance Company RRG, policyholders, not to Wall Street investors who demand profit instead of policyholder value.

Thank you for all that you do as first responders and ongoing behavioral health and social work providers. It is truly a noble profession needed now more than ever. Good luck, and stay healthy!