Little Corporate Response to Rising Insurance Premiums

As the market continues to harden, risk managers are likely to do more to stabilize their costs, says Hanover Stone.

As the insurance market begins to harden, with insurers boosting premiums or seeking stricter terms for some types of coverage, risk managers for the most part are accepting those changes.

A recent survey by Hanover Stone Partners shows only a minority of companies have responded to price hikes or stricter terms by switching their insurer or broker or adjusting their retentions. But John Kelly, managing partner at Hanover Stone, a network of risk management advisers and services firms, predicts that as the insurance market continues to tighten, more companies will look for ways to contain their costs.

Property coverage was a line where companies saw both higher prices and changes in terms. On U.S. property coverage, 72% saw premiums rise on renewal, with 14% seeing increases of more than 15%, 29% seeing hikes of 6% to 10% and 29% seeing hikes of 1% to 5%. And insurers offered higher retentions or deductibles to 29% of the companies, and both restricted terms and higher retentions to another 14%. While 72% of companies made no changes, 14% agreed to more restrictive terms and 14% adjusted their retentions or deductibles.

For global property coverage, 75% of buyers saw premiums increase, with 25% seeing increases of 11% to 15% and 25% seeing hikes of 6% to 10%. Companies renewing global coverage were not offered more restrictive terms, though. Their response to the price hikes: 33% changed carriers, while 67% made no changes.

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