General Liability Erupts as New Casualty Insurance Problem, Plus 9 Other Marsh Market Predictions

Automobile liability has been the problem child for casualty insurers for years, but general liability is becoming the next trouble spot, Marsh asserts in a new report looking at the top 10 U.S. casualty market trends.

“In 2018, a new issue emerges as insurers ramp up the dialogue around poor underwriting results in general liability,” the report states.

Marsh points out that general liability combined ratios have incrementally grown above 100 percent for three straight years. The reasons why: inadequate pricing, growing legal expenses, unfavorable liability verdicts and emerging risk losses that insurers had not foreseen.

General liability should be problematic in the months to come, Marsh added.

That’s partly because general liability “has a longer tail than automobile policy,” the report added. “Therefore, its experience will continue to be burdened by inflation. Insurers generally will no longer offset automobile liability rate increases with [general liability] reductions.”

Here are the other casualty market trends that Marsh predicts for 2018:

• Telematics on the Rise. Marsh believes there will be big improvements in telematics technology and insurers’ capabilities in analyzing the data that telematics generates. “Combined with newer active collision avoidance technologies, organizations with best-in-class safety programs will be able to further differentiate their risks,” Marsh said.

• Workers Compensation. The expectation is that technology will play a more expansive role in workers compensation, claims handling and treatment. There will be more tech additions such as wearable devices and telemedicine, as insurers use both to prevent injuries and treat the ones that happen more efficiently.

• Millennials. The year 2018 is when millennials will start to change the industry after years of hype and expectations. Marsh pointed out that the demographic now outnumbers all other working generations. With the group getting older and purchasing insurance more often, the belief is that their collective risk-averse approach to things will shape workers compensation as well as things like how customers buy coverage online. Millennials are also are tech-savvy, so instant online quoting and other insurance tech initiatives on the customer side should become more prolific, according to the report.

• Customized Predictive Modeling. Expect to see much more customization of predictive models based on an insured’s claims experience and used by carriers, brokers and others to spot potentially costly claims. As well, Marsh said it sees existing predictive modeling tech coming into play to help project an ultimate claim value. This would allow carriers to have a “methodical way to help verify claim reserves and settlement approaches.”

• Market Optimism. Even though hurricanes, earthquakes and other disasters led to historic insurance catastrophe losses in 2017, Marsh said the market in 2018 has room for plenty of optimism because of ample capacity, alternative capital, the tax reform law and more robust economic growth, among other factors.

• Wildfires, Opioids and Shootings. Historic damage from the California wildfires in 2017 means companies including utilities, vegetation management firms and companies that attach to the electrical grid will have trouble with excess liability programs. Those wildfires have also caused liability problems for the construction, liability and real estate industries. Marsh also expects opioids to became a bigger issue for courts and casualty markets. That’s in part because of lawsuits attempting to recoup financial losses from treating addicts, and also opioid exclusions on some classes of business. Marsh said the Las Vegas shootings in October will also put more underwriting pressure on event venues, going forward.

• Pricing for New Risks. Marsh said that technology growth will leave insurers pricing for risks they have never envisioned before, contemplating such scenarios as a self-driving vehicle collision. Expect to also see more underwriting for potential personal injury and advertising injury claims, such as invasion of privacy (blame the Internet of Things and higher connectivity for this).

• Evolving Roles for Chief Digital Officers. Marsh predicts their roles will keep evolving both at insurers and brokers, as traditional carriers and InsurTechs continue to forge closer partnerships focused on improving back-office operations (a more grounded focus for InsurTechs rather than outright transformation). You’ll see commercial insurers benefiting, thanks to these partnerships and their focus on things such as efficiency, data management and customer service.

• Buyers Market. Because rates are likely to remain depressed, brokers and insurers will continue to try to stand out by developing innovative products rather than just making an impression with price.

Marsh’s full report is “The U.S. Casualty Insurance Market in 2018: 10 Trends to Watch.”

Source: Marsh