The fourth quarter composite rate for US property and casualty was up 7.1%, compared to 6.25% for Q3 2020.
The largest rate increases by line of coverage were for umbrella liability, professional lines, and directors and officers liability, according to MarketScout. The only rate decreases between Q3 and Q4 were for inland marine and crime coverages. Rates increased for all sizes of businesses and all industries except for public entities and energy companies.
“Rate increases are continuing. We believe the slight moderation in energy rates in the fourth quarter 2020 is an anomaly based on the considerable reduction in exposures in the oil and gas sector,” said Richard Kerr, CEO of MarketScout. “Rates for public entities were also relatively modest.”
The composite rate increase for 2020 as a whole was 5.6%.
“Composite rates for property and casualty insurance have traded in a relatively tight corridor the last 10 years as compared to the 10-year period of 2001 to 2010, when rate swings were considerably more volatile,” Kerr said. “Improved underwriting tools, catastrophe modeling and more thoughtful reinsurance placements have taken most of the severe peaks and valleys out of the market. Simply stated, underwriters are smarter than they were 15 years ago. The exceptional underwriting and technology tools help make for a more stable market.”
The composite rate for personal lines was up 6.3% in the fourth quarter. This was a reflection of the market’s rate acceleration, MarketScout said. Homeowners with property valued over $1 million paid average rate increases of 8.2%, signaling continuing price increases for large homes.
“Rates are up modestly across all sectors of personal insurance, with high-net-worth homeowners’ rates up the most,” Kerr said. “Wealthy clients are buying more homes as an escape – and if they are not buying something new, they are renovating the ones they already own. Homeowners lucky enough to own properties with the home replacement cost in excess of $1 million have borne the brunt of most of the rate increases, especially in the fourth quarter 2020.”
Kerr said that increases were more severe for those who owned a beach or mountain home.
“Homes in brushfire areas of California or hurricane-prone sections of Florida are assessed rate increases as high as 20% to 30%,” he said. “The only way to offset bug rate increases is to shop your insurance and limit coverage or raise deductibles.”