Hard market ‘fatigue’ to drive shift in commercial insurance, finds report

Commercial insurance policyholders and brokers are experiencing hard market “fatigue”, which is predicted to drive further market evolution, research has shown.

This is despite the market “responding remarkably well” to the major stress tests of the past few years, such as COVID-19, natural catastrophes and geopolitical tensions.

The report titled  The State of Commercial Insurance, said that in response to hard market “fatigue”, policyholders and brokers are looking to mitigate premium increases with lower limit reductions or by seeking capital from new market entrants.

The report added: “As a result, carriers predict a rise in self-insurance solutions and alternative risk transfer through fronted or captive solutions.”

Published by the  Council of Insurance Agents & Brokers (CIAB) and professional services firm  EY, the report details the insights of a survey of primary players in the commercial market including carriers, brokers and policyholders (employers), and the industry trends and challenges they face.

It highlights pressure points such as evolving customer preferences and digital transformation; systemic risks, including environmental, social, and governance (ESG); premium pricing; overall macroeconomic conditions; and geopolitical risk.

It also provides insight into how each group is dealing with these pressures.

For example, the report said: “Insurance buying, advising, and underwriting skills are being tested by emerging risks not necessarily contemplated with the traditional risk transfer products or risk prevention services currently available.

“At the same time, clients are reporting a shift to a more holistic approach to insurance and risk management decisions, with increased communication among senior management and boards.”

It concluded that by responding to changing consumer expectations, embracing technology innovations and market conditions, “the industry has responded remarkably well”.

The report added: “With policyholders expecting customised service, transparency, data and innovation from their insurers, operational innovation has been key to the insurance industry’s strength.

“Carriers have realised that investing in technology is a business imperative and not a ‘nice to have’ option and are making investments ranging from customer portals and automation, to AI and prescriptive analytics for underwriting. Brokers, as well, are investing in technology that improves the efficiency and efficacy of their work with clients.”

Ken Crerar (pictured), president and CEO of  CIAB, said the study was “unique” because it offered the opportunity to compare investment strategies, business priorities and industry perceptions from the three cohorts side-by-side.

“As we continue to navigate challenges resulting from the pandemic, this research from the council and  EY can act as a springboard for brokers, carriers and policyholders to level set on expectations and have deeper, more productive conversations about the future,” he said.

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