Independent agents and brokers need to pay close attention to the current state of the umbrella insurance market. Recent trends show significant changes that could affect how they operate and advise their clients.
An umbrella policy acts as an extra layer of protection beyond standard liability insurance. It kicks in when the limits of underlying policies are exhausted or when specific exclusions apply. This type of coverage can be crucial, especially as claims grow larger and more complex.
Despite an increase in overall insurance market capacity, umbrella pricing remains under pressure. Traditionally, clients might expect a $5 million umbrella policy, but many are now seeing options of $2 million or $3 million instead. This shift is partly due to rising litigation costs and what’s known as social inflation, where the costs associated with claims are increasing. Reports indicate a sharp rise in large jury awards, with significant verdicts becoming more frequent.
Underwriting practices for umbrella policies have also tightened. Insurers are now more selective and data-driven, focusing on a client’s loss history and risk management strategies. They are likely to require higher underlying limits before offering umbrella coverage. Agents should prepare to help clients present their risks clearly and effectively, emphasizing safety measures and transparent claims history.
Another important factor is the financial strength of the insurance carriers. Chris Longo, a CEO in the insurance sector, highlighted that agents should not only focus on policy language but also consider the carrier’s ability to handle claims. A strong financial background and experience in managing large claims are essential for ensuring that claims can be paid when needed.
When it comes to personal lines clients, many with limited assets may not see the value in umbrella insurance. Marjorie Segale, an insurance expert, pointed out that it’s crucial for clients to understand that their personal worth is not the only factor. The potential damages that could be claimed against them are what truly matter.
Looking ahead, the outlook for commercial umbrella insurance shows rates for middle-market buyers may remain stable or increase by up to 10% in the next six months. Buyers with a history of claims might see increases of up to 20%. While the capacity for umbrella and excess liability lines remains adequate, social inflation continues to pose challenges.
In summary, the umbrella insurance market is experiencing notable shifts that agents and brokers must understand to effectively serve their clients. With rising claim amounts and stricter underwriting, staying informed and prepared is key to navigating this evolving landscape.