Product liability insurers face liability claims challenges as trial lawyers ramp up around new mass torts including opioids, e-cigarettes, talc, and Round-Up. This is apparent from some of the recent judgments and settlements against the manufacturers of opioids. How this migrates through other insurers is unknown as of yet.
These emerging product liability exposures coupled with social inflation, will likely impact industry loss costs. This year’s study suggests that liability lines redundancy in past reserves has grown thin as industry reserves remain close to previously booked levels for the last four accident years. Given the recognition lag in emerging products liability, the industry is likely posed to experience some adverse development, according to Thomas Hettinger, Managing Director, Strategic Advisory, Guy Carpenter.
This is one of the key insights identified in Guy Carpenter’s Risk Benchmarks 2019 research report.
The workers compensation sector has continued to work through effective change management and is now into its sixth year of nominal underwriting profit due to initiatives around loss control, return to work, nurse interaction, and prescription management. Our analysis illustrates how the nationals and largest carriers have started to separate themselves from the regionals as they leverage technology and scale in their pricing, claims, and underwriting disciplines. Direct written premiums for workers’ compensation declined slightly in 2018 to just over USD 57 billion.
This segment is not without challenges, including potential systemic risks that could shift the footprint for all carriers. It is managing through an opioid epidemic impacting claims duration and the number of viable bodies available in the workforce. Other future systemic challenges to be considered include the impact of marijuana legalization, increased deployment of automation and the resulting displacement of traditional workers, the number of people with and without health insurance, and the impact of a recession and potential for morale hazard.
Commercial auto liability continues to search for solutions as it steadily drains earnings for many and surplus for some. Forty of the top 100 commercial auto writers experienced combined ratios in excess of 110 percent in 2018. Fifteen of those companies had combined ratios in excess of 120 percent. While the industry has seen some improvement in combined ratio in total, dropping to 105 percent after multiple years in excess of 110 percent, rate changes have been met with adverse selection as across-the-board increases drove the marginally better risks into self-insured configurations or to companies with better segmentation plans. For instance, Progressive’s strong entry into the sole proprietor and small fleet segment of the market will sound an alarm for the unsophisticated insurers and put greater emphasis on creativity and analytics.
We have found that carriers offering more risk management capabilities to their commercial insureds can differentiate from those insurers offering only a traditional insurance product and may therefore be able to avoid competing purely on price, while at the same time, helping to manage losses.
Commercial liability lines continued to show stable performance with 2018 net combined results hovering just below 100 percent, consistent with the trend over the past 14 years (save 2016). Regional business endures as the outperformer in the industry, but its portfolio tends to be more personal umbrella-based, whereas the other segments work with tougher risks and/or higher limits and attachments of policies.