Commercial Insurance Price Increases Slowing as Deductibles Trend Upward

Commercial insurance prices continue to increase to varying degrees across lines of business, but the size of those increases is decreasing, according to a new report from Aon.

The Aon Global Market Insights Q2 2021 report noted that new capacity continues to enter the market, so, while capacity is tight, it is sufficient for all but the largest or most complex placements, especially for directors and officers coverage.

Underwriters' information requests continue to be more detailed and rigorous, according to the Aon report. Meanwhile, insurers are continuing to apply sublimits to cap their overall exposure due to increased focus by technical and actuarial teams.

Deductibles are trending upward in order to shift some risk and help offset insurance price increases, Aon said, and insurers are mandating clarifications and exclusions for silent cyber, infectious disease, and contingent business interruption.

On the reinsurance front, new capital has come into the market, and reinsurers continue to evaluate new areas for growth, the report said.

In North America, improved market conditions are on the horizon, Aon said, as rate increases are decelerating and insurers are looking to regain share of classes of business they deem profitable. The COVID-19 pandemic continues to influence buying decisions as some businesses—particularly smaller businesses—continue to suffer economic stress and are looking at insurance coverages, limits, and deductibles as a possible area to cut costs, according to the report.

Cyber risk remains a global challenge across industry segments, the report notes, underscored by the increasing frequency of ransomware attacks.

In the United States, cyber insurers are concerned about the aggregation of risk, and many are now deploying less limit, the Aon report said. While most cyber-insurance coverage towers can be renewed at expiring total limits, underwriting scrutiny is high, and supplemental applications are commonplace. Buyer loss control and cyber-risk mitigation strategies are critical to securing coverage, Aon said. US cyber retentions are increasing, particularly in the middle market, and rate increases are significant.