Opinion: 2024: A stabilized commercial insurance marketplace

Hunter Johnson

In November 2023, during a time of consistently bad news and dramatic rate increases, I wrote a guest column titled “2024 market outlook: A case for optimism” for Springfield Business Journal. In it, I offered a small glimpse of hope for insureds, painting a picture for more moderate insurance market conditions for 2024 and into 2025. At that time, the United States was in the midst of a six-year-long sustained hard insurance market as insureds in the U.S. were experiencing 20% property increases and nearly 10% increases to commercial insurance premiums across the board, as well as increasing difficulties procuring coverage with desired terms and coverage, according to the Council for Insurance Agents & Brokers’ 2023 Q2 market index report.

Insurance companies in the U.S. were passing along these painful changes because they were not faring any better themselves. The entire property and casualty industry booked underwriting losses in 2022 and 2023 and finished 2023 with an industry combined ratio of 104%, according to the National Association of Insurance Commissioners. Losses were concentrated in several areas, with the most pronounced being property – which was a line whose results were driven largely by inflation and the increased cost to repair and rebuild structures, increasingly severe and more frequent catastrophic weather events and the lack of sufficient modeling data to predict losses. In response, insurers pushed higher rates, reduced coverage terms and limited capacity (how much insurance they’d offer) in order to reach profitability.

Fortunately, what we predicted back in 2023 appears to have come to fruition.

Through the first half of 2024, we have seen the first batch of underwriting results with the increased property pricing and higher deductible structures that insurers have been pushing onto insureds over the past two renewal cycles – and the results seem to be positive. Insurers posted an underwriting profit for the first time in two years in Q1 2024 at $3.8 billion, which was a $27.8 billion improvement over the $24 billion underwriting loss posted during the same period the year prior, according to credit rating agency AM Best. This is good news as carrier profitability promotes market participation and competition amongst insurers. Thus far in 2024, we have seen more carriers participate in industry segments, increase their line capacity and – for the first time in years – compete on accounts now that they feel more comfortable deploying terms at the newly established market norms.

All of this has led to stabilizing market conditions for insureds (consumers). Those insureds who have gone through a renewal cycle this year have likely noticed less dramatic changes to their pricing and coverages from their year prior. Year-over-year rate increases for insureds dropped to 5.2% in Q2 2024, which is a sharp drop from the 7.7% average in Q1 2024 and less than half of what was experienced in in Q3 2020, of 11.7%, according to the Council for Insurance Agents & Brokers. Although some fundamental headwinds do remain, including a high-interest rate environment, increasing auto liability pressures and excess liability challenges, the marketplace as a whole continues to moderate – and will likely continue do so through 2024 and into 2025.

In this stabilizing environment, insureds will be underwritten more emphatically on their own merit, meaning that favorable rates and terms will be more attainable for high-quality risks that maintain positive loss results. With this in mind, it will become paramount for insureds to craft narratives around their individual account characteristics, including company practices, policies, capital investments, claims and methodology around valuations and desired retentions to access better results. This will assist their commercial broker when approaching the marketplace in an effort to capitalize on the improving market conditions.

Hunter Johnson is vice president of Alliant Insurance Services Inc., specializing in workers’ compensation, alternative risk financing and complex risk placement. He can be reached at hunter.johnson@alliant.com.