Rates grew across personal, commercial insurance lines in Q4
Coverage of homes valued at more than $1M saw the biggest rate gains on the personal side, while a few commercial insurance lines jumped double digits.
Composite rates for commercial and personal insurance lines rose 7.1% and 6.3%, respectively, during the final quarter of 2020, according to MarketScout.
Looking at full-year results, the composite rate increase for commercial insurance was 5.6%, while personal lines saw 4.5% year-on-year gains during 2020. The insurance distribution and underwriting company reported that despite an extremely challenging year, insurance markets continued to function efficiently.
Rate increases for large homes persist
Owners of homes with replacement values beyond $1 million saw the biggest rate increases, pegged at 8.2% during the quarter, which signals prices for large homes are continuing to grow. Homes valued under $1 million saw rates increase 5% during the period.
“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,” Richard Kerr, MarketScout CEO, said in a release. “For those homeowners fortunate enough to own a beach or mountain home, increases are more severe.”
California houses in brush fire areas and hurricane-prone sections of Florida, for example, saw assessed rate increases as high as 20%–30% percent, according to Kerr, who added: “The only way to offset big rate increases is to shop your insurance and limit coverage or raise deductibles.”
Personal auto insurance rates were up 6.2% during the quarter, which also saw personal article line rates increase by 5.8%. MarketScout explained auto rate growth was primarily propelled by increases in loss ratio. While there were fewer motorists on the road during the pandemic, driving actually became riskier during 2020.
Professional, umbrella, D&O see upsurges
Professional lines, umbrella liability and D&O policies saw the biggest rate increases during the period, with growth in excess of 10%, MarketScout reported. Further, commercial property and auto saw rate increases of 9% and 8.3%, respectively.
Inland marine and crime coverages were the only classes to see quarter-on-quarter declines, according to the insurance distribution and underwriting company.
“Composite rates for property and casualty insurance have traded in a relatively tight corridor the last ten years as compared to the ten-year period of 2001–2010 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.”
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