Editor's Note: This article is part of a four-part series from Zurich North America and focuses on the current and historical trends in general liability lines. Other articles will focus on workers' compensation and property, while the first installment reviewed commercial auto insurance. In my initial trends in commercial insurance article, I explored six societal trends influencing the rate environment for commercial automobile insurance. An evolving liability environment is continuing to challenge the profitability of the auto line and is driving rate increases. As you might expect, auto is not the only category of commercial insurance being challenged by our changing society. Liability lines have seen a steady upward trend in calendar-year loss ratios over the past several years, necessitating rate increases by liability underwriters. Looking ahead, the property & casualty insurance industry may experience additional stress on general liability results due to a variety of potential headwinds over the next 12-18 months and beyond.

(Credit: Zurich North America)

To control general liability costs, know your risks

The cost of general liability insurance coverage will increase over time for a variety of reasons, with medical inflation, social inflation and uncontrolled litigation costs driving current, visible costs. But the General Liability line is also the insurance coverage that always pays for the unexpected, emerging hazards such as those noted above. Medical costs are likely to continue their upward trajectories, while social inflation related to expanding litigation and mass torts are on a similarly problematic path. These cost trends are largely outside the ability of any one insured to impact beyond active lobbying for legislative solutions such as tort reform. However, insurance rates may also increase due to a company's individual loss history or the loss development of the specific industry class of that company. Proactive risk mitigation and engineering can dramatically improve an insured's individual loss experience, but the customer's industry class often plays a significant role in the cost of insurance for middle market-sized insureds who have relatively few losses. A company's ability to articulate how they are "best in class" is critical in the final determination of their insurance costs. Working with a strong insurance broker and carrier to perform periodic assessments of potential liability exposures by examining individual risk characteristics, as well as the risks a company may face simply by being part of a particular industry, is critical to building a partnership that will minimize the impact of the broader inflationary trends. By keeping lines of communication open with key risk management partners, you will have a much clearer perspective on where you stand – and how you can improve your position — no matter the direction market trends may drive the costs for liability coverage and all other lines of insurance critical to a company's success and sustainability. The above slideshow goes into depth on seven trends that are influencing general liability insurance. Alex Wells is the head of U.S. middle market for Zurich North America, where he is responsible for driving a dedicated focus and oversight of our investment in redefining and profitably positioning our middle markets business. This article originally appeared on the Zurich North America site and is reprinted here with permission. Opinions expressed here are the author's own. Related: |

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