The third quarter of 2020 saw the composite rate for personal lines in the U.S. increase by 5%. Commercial insurance also saw increases on every line of coverage and industry class during this period.
The third-quarter composite rate for personal lines in the U.S. increased by 5%. At the end of the second quarter, personal lines rates were holding steady at 3.5% but high CAT activity is driving up rates.
“The composite rate is measured on millions of insureds across the United States in low risk areas. Conversely, homeowners in California and coastal areas of Florida are suffering massive rate increases," says Richard Kerr, CEO and founder of MarketScout.
“If an insured owns a home in high risk wildfire or hurricane areas and has suffered prior losses, rate increases can be as high as 40%. Many admitted insurers are avoiding taking risk in these areas, thereby, driving insureds to the non-admitted market," Kerr says. “Since there is less regulation for non-admitted insurers, they can restrict coverage and charge higher rates."
Homeowners with a home value under $1 million saw their homeowners coverage increase by an average of 5% while homes above $1 million increased by 5.5%. Meanwhile, automobile rates were up from 4% in the second quarter of 2020 to +5% in the third quarter. Personal articles coverage was also more expensive with an increase from 2.7% in the second quarter to +4.5% in the third quarter.
At the close of third quarter 2020, commercial insurance buyers were assessed rate increases on every line of coverage and industry class. The composite rate is up 6.25% for the third-quarter 2020 as compared to up 4.8% in the second quarter.
“Rates began adjusting upward at a quicker pace in September," Kerr says. “We expect that fourth quarter 2020 will reflect continued aggressive rate increases in property, directors & officers and umbrella/excess liability coverages."
D&O rates were up the most at +11.5% followed by umbrella and excess liability which registered an increase of 8.5%. For the first time in over five years, workers compensation rates were up, albeit only .5%.
Below is a table containing market data of the largest composite rate increases.
|Coverage Class|| |
|Commercial Property||Up 7%|
|Business Interruption||Up 5.5%|
|Inland Marine||Up 5%|
|General Liability||Up 5.5%|
|Commercial Auto||Up 8%|
|Workers Compensation||Up 0.5%|
|Professional Liability||Up 7.5%|
MarketScout is a national MGA and wholesale broker specializing in assisting agents in placing high net worth personal lines business.