Insurers Feeling Rate Pressure
2020 had a significant impact on the insurance marketplace — perhaps nowhere more so than on claim settlement costs and rate inadequacy.
Severe storms in the Midwest, hurricanes in the South and wildfires in the West, combined with supply chain disruptions caused by a world-wide pandemic, have put a significant strain on building materials and available labor. Added to the pressure of the availability of building materials is the fact that the housing market continues to boom for both new and existing homes, sparked in part by historically low interest rates.
Combined, these factors have led to spikes in new construction costs of up to $200 and $300 per square foot. The impact to your mutual is a rise in average claim costs and premium rates that have not been able to keep up.
Given these historic loss events, now is the time to consider a rate review. WRC highly recommends that you periodically look at your rates to see if they are where they should be. Not sure how to go about that or feel that process might be too difficult with limited resources?
The WRC Mutual Assistance team is here to help you with the process by performing a property rate study based on your specific company information. Rate studies are the most accurate way to determine on which line of business you are losing or making money. With a rate study, we look at the last 10 years of your premium vs. your losses and break it down to the coverage level. This helps determine what your loss ratio is in each area and in what coverage segment rate adjustments may be needed.
The best part about a rate review is we often find it is not always just about the premium. We often discover other areas that need attention, such as deductible shifts (with no change in base rate), fuel surcharges, a policy surcharge and using proper endorsements to limit the exposure. Making adjustments may help a mutual remain profitable as claim costs and operational expenses continue to rise.
In addition, we can assist you with looking at claims that have the largest impact on loss history and use that information to design a proper inspection program to avoid poor risk selection. Our goal is to partner with you so your mutual will remain financially sound and prepare you to assist customers with whatever comes next.
Ultimately the decision to review your current rates and procedures is up to you. WRC is here to support you and your mutual should you need our assistance. Even if you are not sure and you just want to discuss the process and see what works best for your mutual, we are here to help! We look forward to working with you now and in the future.
Feel free to reach out to the Mutual Assistance team anytime and for any reason. We hope to hear from you soon!
Vice President of Mutual Assistance