Are Your Casualty Limits Adequate? Don't Chance It!

During economic slowdowns, including the global coronavirus pandemic, many insurance buyers are tempted to pare the size of their programs. With the property and casualty insurance marketplace hardening across virtually all lines, the cost of maintaining existing levels of coverage is going up. Deciding to buy less liability coverage, however, may be a big mistake.

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 Featuring:

• Philip Cook is a broker based in CRC’s Birmingham, Alabama office and member of the Casualty Practice Advisory Committee.
• Marv Rubin is a broker based in CRC’s Redondo Beach, California office, specializing in Casualty business.

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Transcript

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Dan Wentz: [00:00:00] The casualty insurance marketplace is seeing rising costs, nuclear jury, verdicts cuts and capacity. It's no secret that in these conditions, insurance buyers might be seeking cut coverage to save costs. We're joined by two members of CRCs casualty practice advisory committee. Philip Cook from CRC, Birmingham, and Marv Rubin from CRC Redondo beach to explore these issues.

[00:00:22] And more next. 

[00:00:49] Dan Wentz: [00:00:49] Phillip, if you could, could you, can you give us a quick update on casualty and tell us a little bit about what you're seeing in casually market, safe to say it hard it's hardening right now, right? Or it's, it's becoming even harder than it was. Pricing those kinds of things what's going on right now with casually.

[00:01:05] What are you guys seeing? 

[00:01:06] Philip Cook: [00:01:06] yeah, the cash market is, increasing every time we turn around that every six months, a year or year over year comparison, we're seeing increases on virtually every line of business that we're, we're, we're working through every class of business we're working on. It's it's particularly demanding, trying to, to in difficult, trying to find a replacement market, new market, you know, it's a product of, of litigation.

[00:01:34] It's a product of, insurance carriers, loss, our products, good margin or lack thereof. and we're continuing to face it. And we keep thinking that maybe every six months it'll change. But, we have not seen that trend adjusting in quite some time. so, we continue to think it's going to happen.

[00:01:54]and, and, and this market's here to stay and it's probably going to get a little worse before it gets better. 

[00:01:59] Dan Wentz: [00:01:59] And Mara out there on the West coast, are you guys seeing the same thing with the markets hardening and, you know, prices going up? 

[00:02:05] Marv Rubin: [00:02:05] Absolutely. I have to agree with Phil here, that the markets are pretty reactive to what's going on.

[00:02:10] And as the loss experience tends to develop here, they're seeing that, you know, with rising judgments and everything else that what used to be profitable business for them is no longer. So we're seeing, you know, some of these carriers who for a long time were invested in many industries are either pulling out or they're just seeing their attitude to it by picking attachment points, whether that's moving out of the top, up in the tower or altogether.

[00:02:33] Exiting the class. So the, the trick here has been trying to figure out which markets are longterm partners and, seeing which ones really underwrite their book of business the right way, and really want to support their insurance. 

[00:02:47] Dan Wentz: [00:02:47] What do you think is causing all of this rising, a rising costs in excess and umbrella right now?

[00:02:53] Philip Cook: [00:02:53] Everybody says basically the same thing. It's the nuclear version, that are going on out there. I mean, every, every month you hear of a, a horror story worse than the month before in some large, case out there, where, you know, whatever tragic situations happen, but you know what, the $2, 2 million off settlements now, $4 million settlement would just be a $10 million settlement is not 30 or $40 million settlement.

[00:03:20] And. you know, there's more of alluded to, that's getting underwriters to change their, appetites and, and that's one of the main, causes of this market to continue to grow or to get worse. 

[00:03:31] Dan Wentz: [00:03:31] So Marv social inflation is a key word. That's being thrown around a lot in the insurance industry right now.

[00:03:36] That's having an effect, 

[00:03:36] Marv Rubin: [00:03:36] right. Absolutely. These are using whatever they can to increase this verdict. So social inflation or reptile theory, whatever it may be, they're using these tricks to kind of encourage juries, to point the finger at the deepest pocket. We're seeing that, you know, whether it's casualty lines of business, including the general liability and auto, as Phil kind of said, they're there, they're really hard putting their response on these examples of the nuclear judge judgements, you know, that were actually even getting some of our markets will support the reason for not writing them a piece of business.

[00:04:13] By sending us articles, we just, which is amazing to us that, you know, we read about it in the newspapers already, but then that goes in clouds, their judgment even further. So that hurts from the get go from the market standpoint. But then on the back end, when you have the jury's involved and they hear about the same thing, it's kind of a double whammy 

[00:04:34] Dan Wentz: [00:04:34] for sure.

[00:04:35] And those nuclear verdicts are. It seems to be definitely increasing. We've got a whole bunch of statistics on our article on tools and intel@crcgroup.com that goes into the details about trucking companies. Specifically. That's a tough area right now. And Marv, do you do a lot of trucking business? 

[00:04:54] Marv Rubin: [00:04:54] We tend to do a lot more general liability and excess.

[00:04:57] We do play some auto as well. You know, it's funny when I just talked about an article and underwriter sent me, you know, they just, we were actually placing an auto risk and their reason for not biting. It was that a 60 million plus verdict in Texas happened. And because of that, they didn't want to write it.

[00:05:12] And they were probably going to take a loss on it. So yeah, all those been particularly hard, you know, trucking people are focused on the risk management around it, especially from an Android standpoint, they want to know about telematics fleet safety, all of that. But, the trucking companies are having a hard time, especially with the way that those towers that are layer you no longer seeing long limits on it.

[00:05:35] You know, you're lucky, you know, you get an auto CSL, then you have to place a buffer on top of that. And then once you get into the excess, you, you know, you may get a $5 million lead, $10 million lead, but it tends to be incrementally, very, very short limits. We're not seeing somebody, you know, in past where we used to get 10 X, 50 or 20, even 25, you know, five to 10 years ago, but that's long gone.

[00:05:57] And the relativity between those layers is ever increasing. As the judgements increased because they feel like their feet are closer to the fire. 

[00:06:05] Dan Wentz: [00:06:05] So everything is more expensive. Right? The market's hardening, I have to imagine that if I'm an insurance buyer out there right now, I've gotta be thinking about ways to save costs.

[00:06:16] Right. And they're probably the first thing they look at is, well, things are more expensive. I've got to buy less of it. Right. is this a wise decision Phillip, to, to cut your coverage in this market? 

[00:06:28] Philip Cook: [00:06:28] I think the short answer is, is probably not. Obviously you have to do what you can do to, you know, remain a business, remain profitable.

[00:06:35] I think insureds will have budgets. They, you know, preset them for their insurance cost and, you know, they didn't allow for these large percentage increases. And so they look at their insurance budget and they look at the quotes they're presented to them. They said, well, these don't match. what do I do?

[00:06:51] And so what we're seeing a lot of is is these carriers or these insureds saying, well, I'm not gonna, you know, Ford that last 10 million on top of my, you know, $25 million umbrella tower. I'm going to cook from 10 to five because now I can afford it. so, you know, we're, we're certainly seeing that, at the same time we're seeing these nuclear verdicts and social inflation and, you know, $2 million verdicts are four and 10 or 30.

[00:07:15] And so you've got those two, lines of thinking, going counter to each other and, which ultimately ended up insurance being under insured for what they have historically decided to do. 

[00:07:27] Dan Wentz: [00:07:27] And businesses are probably, I would imagine one of the things they say is this pandemics hits, I've had to lay off staff.

[00:07:33] We're making less money than we have before. Does that mean that they have a lower, liability exposure, Mark? 

[00:07:41] Marv Rubin: [00:07:41] No, absolutely not. That's, that's really shortsighted of them, honestly. You know, when you have the capacity there, sometimes it's hard to get it back in the first place once you can reproduce, but more so you have longterm exposures, especially we, we tend to write a lot of construction in my group and that's tail business.

[00:07:58] So just because your revenues are down right now, doesn't mean that, you know, your loss experience or your potential loss experience is going to be any lesser. you know, we, we really do see that. Tends to be that when you cut the limits is when the planes tends to hit you with, especially with construction.

[00:08:16] The hard part is that you don't know for five to 10 years down the line. So you really have to look at your cumulative exposure over, over that time period, rather than just what's going on now. and even though you may not have from a, from a premises exposure that people aren't walking in your doors right now because of COVID and closing businesses doesn't mean that someone can't file a claim.

[00:08:35] Whether that's, you know, if you're a restaurant and you, you're going to start serving more people through delivery apps, and now you have more exposure to the food borne illness. It's this new kind of normal, if you want to call it, that is, is bringing on new exposures for these companies that they didn't have before.

[00:08:50] And kind of what Phil was talking about with, you know, your limits don't go as far. So cutting yourself down from 10 to five, but with the nuclear judgments, if that claim, which you thought used to be 1 million is now 10 million you're in, you're in a deep hole. When that hits, 

[00:09:08] Philip Cook: [00:09:08] I think following up on that ideas on products accounts, for example, Just cause you've cut back and your sales are less, you still have a long shelf life on your part.

[00:09:17] And so, you know, all the, all the different, widgets that you have out there in the marketplace are still there and they still have the chance to have an occurrence in the future. So, you know, you may have less sales in the next year because of the COVID or whatever reason. but that doesn't mean you still you've lowered your chance of the claim in the future, on more service or construction related, businesses.

[00:09:39] You're, you know, cutting staff, you're trying to, stretch every dollar. And so you've got, your employees potentially doing. Two or three jobs, and they're, you know, stressed and overworked and, and, you know, that has its potential creating a claim that you wouldn't have had in years past, cause you had a full workforce.

[00:09:58] So the chance of error, is probably growing. And, the chance of that occurrence in the future is going, even though, your sales are dropping. So again, there, there are flowing counter to each other. Yeah, 

[00:10:09] Dan Wentz: [00:10:09] for sure. So you could have more risk right now as a matter of fact, just because you're, you're either changing your business or, you know, going, going in a different direction.

[00:10:20]you know, and plus you're trying to cut costs at the same time. That's not going to work out for you. So, I get it. Yeah. What about claims inflation? obviously claims are, becoming inflated this social inflation that's eroding away at the policy limits, right? Is that what you guys are seeing?

[00:10:34] Philip Cook: [00:10:34] Yeah, I think that's correct. One of the things sort of ties into the other things we can talked about is, you know, there are people out there that don't have jobs and are a little more desperate. And so they are more willing to, to, you know, put forth a claim to try to make some money, via a suit. And as opposed to.

[00:10:52]you know, another way of earning a living. So, you know, there is, we drive up and down the roads, we see all these billboards, or you watch the news and you see, you know, a, a, an ad for a plaintiff's firm. you know, those, those are they're, they're re the reason there, there is a profitable they're making money on these, these chain claims and these suits, you know, they're, it's my understanding that private equity can invest.

[00:11:14] And there are investment vehicles for investing in these claims. and so that's just pumping more money behind the, the, the, the plaintiff's side of these cases, which, you know, they're winning. and so therefore it's causing, you know, every claim to be a little bit bigger than it used to be. 

[00:11:31] Dan Wentz: [00:11:31] And Marvel what's currently going on with insurance markets, are we with losses up?

[00:11:36] Are they, are they changing how they do things? 

[00:11:40] Marv Rubin: [00:11:40] Yeah, I think we kinda touched a little bit on this earlier, but you're seeing a lot of markets, especially if we want to focus on access itself is cutting the capacity. You know, there are markets that have exited industries, like I talked about earlier, but more so looking at either.

[00:11:55] Reducing their capacity or stretching their capacity against different industries. So they're, they're more balanced throughout on their book. So, you know, we're seeing these companies that used to put up 25 or 10 exit fees, and now that they're cutting down to five or less sometimes, and sometimes they're even mandating that the underlying limits below them, the primary limits are greater.

[00:12:16] Right. They used to say we would be okay in sitting over a one mil CSL auto, and now they want to see two, three, five, so not only are they cutting the capacity, but, but the rate increases are they're significantly. So what they used to maybe charge for, for a 10 mil limit, now they charge the same. and in addition, as they're kind of figuring out the loss experience on those books and, and getting more data through, you know, industry experience in their own.

[00:12:43] They're figuring out where they want to play in those towers. So, you know, used to be, we had some carriers that will have to be in the lead position and all of a sudden they're they're high excess capacity, but it, but it really does depending on the nature of the risk itself and what's driving the reason on it, is it, you know, as it auto-driven is attached with other casualty lines that are getting to them, have they taken a nuclear verdict in that, in that industry, which may some gun shy?

[00:13:07] So the rate increases are pretty significant. And then seeing that these, whether or not they're still running class business, and then where they want to, where they want to sit in that tower, it becomes a puzzle piece as, as you're going through these renewal business accounts and trying to figure out, you know, you have to get it, get a little bit ahead and talk to these guys about what they want to do.

[00:13:27]especially when you. You know, I had a couple of counts last two months that we had 25 X. And we, you know, we started that conversation with some bro guys to talk about it, to make sure that we knew that when we present in that renewal, that, that 25 Expedia was off the table. So, so it's a combination, I think of reaction toward the markets in terms of what they want to write, how they want to ride it, the limits they want to do it at and wearing the tower.

[00:13:50] Dan Wentz: [00:13:50] And I'd imagine we're seeing a lot of, a lot more exclusions, particularly for communicable diseases, right? It's kind of standard now. Yep. I don't even have to ask that question. 

[00:14:02] Marv Rubin: [00:14:02] Yeah. All the way around and whether it's applicable or not, it's almost become like a treater requirement that they want to see that on all their lines of business.

[00:14:10]and it's fun. You will see that each carrier has kind of developed their own wording. So even though it may be in the underlying and they may be picking it up with their follow form wording or their form, they may still attach their own because they're more confident in their wording. 

[00:14:25] Dan Wentz: [00:14:25] So, what, what should retailers be expecting upon renewal now, especially with this harder market, you know, what should they be telling their insurance and what can they expect when they're heading into to get a renewal done?

[00:14:38] I mean, 

[00:14:39] Philip Cook: [00:14:39] I, I guess my answer to that is, you know, depends on the line of business, but we're seeing re re get pushed everywhere, on the casualty side. you know, the spec rate in your GL breaks back rate in your audit, as for your umbrella, you're gonna expect disproportional rate as you get higher in the tower, the rate increases get more than, eh, we haven't had that phenomenon in years past, but that is a new change.

[00:15:08]I would say that. If you're, if you come to your renewal and your incumbent carriers are offering their renewal and they're offering their capacity, then you should land. Okay. Okay. Is all relative, but you shouldn't land. Okay. The biggest problems we see are, or renewals where capacity's cut, attachment points are increased, or somebody just non-renewed all together.

[00:15:32] So you have to go out and find new capacity. And a new capacity is expensive and therefore it affects everything you're doing on your renewal. And, so those are, those are the particular particularly problematic for retailers and insurance. and those are the ones that are hardest to place.

[00:15:47] And they usually go right on down to the wire, which is becoming unfortunately more of the norm. It's harder to get far, you know, way out ahead of these things. 

[00:15:54] Marv Rubin: [00:15:54] Yeah. I agree with Philip here that you've got, you've got to be prepared for significant changes one way or another, whether it's the rate itself or bringing new carriers on onto the program, the best thing is to understand your insured right.

[00:16:07] And understand what's going to happen at least predict as much as you can, you know, be prepared, know what, know if they have a large loss, make sure that you presenting that narrative or whatever. What may have you to at least get ahead of the ball here. I think that, what, what Phil said about, you know, if you have your and common carriers and they're offering renewal terms, it's, it's really imperative to keep these guys in for as long as possible, especially if they supported the programs, they tend to be the most competitive it's.

[00:16:35] It has been a little harder to move longterm standing renewals. when these guys can kind of lean on what they have, you know, so called premium in the bank. But if you, if you know, it's a herring class of business, you know, trucking we've, we've talked about, for example, You gotta, you gotta get out in the marketplace early and make sure that you're to be paying rate hikes and that they're gonna, they're gonna be looking at.

[00:16:59] A few more carriers involved throughout the program. So I think that's kind of imperative is that narrative, especially not just to our brokers, but also to the insurance themselves to make sure. Cause they're not as in tune with the market, obviously as our brokers are. So best thing they can do is, make sure that that message is heard loud and clear.

[00:17:19] Yeah. 

[00:17:20] Dan Wentz: [00:17:20] So, some, some practical steps that I, that was the next thing I was going to ask you guys is, you know, what, what steps can a retailer take to better position themselves on our renewal submission, but we've already covered, you know, helping your insured to understand their exposure, more time to shop for coverage, 60 to 90 days, right?

[00:17:38] Seems to be about standard. what else is there anything else that, that, you know, a retail agent could be doing right now that could help them out? 

[00:17:46] Philip Cook: [00:17:46] I think one of the problems we all naturally face is that, you know, you get far enough out in front of these renewals. Sometimes it's, you know, six months out in front of her, know when you're having renewal conversations with the insured, you know, your, your broker or your retail agent is, and, you know, you'd give them a bad story.

[00:18:03] You say expecting, you know, all these increases. Well, you know, that insurer doesn't totally understand. And so they say, well, I need competition in order to, Now deal with this thing that's coming. And so that's tricky situation for all of us, is that we try to inform our insureds, but you know, the, the, the, the moment that we're truthful, honest and up for, you know, a front with the insurance, then, you know, they invited competition, which, you know, obviously is a, is a timing situation.

[00:18:30] But I, I do think that you're better off to be up front with. With any buyer in any situation. So, you know, as far out in front of these renewals, as you can, even if you're, we alluded to budgeting earlier, if you can get in at the budgeting level and, you know, really be a part of your insurance, plan, I think that, you know, gets you, it gets these insurance a little bit more prepared for what can be a really bumpy finish line.

[00:18:53] Yeah, 

[00:18:54] Marv Rubin: [00:18:54] better, better not to over promise and under deliver here, I think is kind of the story is making sure that they're prepared to with the marketplace, because even though their loss experience may be great and they're not the bad boy in the room, you know, the markets look at it as we need overall rate increases across this, this segment.

[00:19:13] So making sure that that messages is pass along, whether it's supported by statistics, that show, you know, this class of business has been hurting. Hurting the insurance carriers. And therefore, this is, this is now they're trying to at least be profitable, just like they want their insurance to be. 

[00:19:28] Dan Wentz: [00:19:28] Yeah.

[00:19:29] And helping our retail agents out is, is really important to us here at CRC group. Philip, I know you've got a lot of, experience with these, benchmarking reports. We do. Can you talk a little bit about those and how those can benefit retailers, especially in this art market? 

[00:19:42] Philip Cook: [00:19:42] Yeah. So CRC, we we've invested a lot of money in our data collection, which gives us a, I think, a unique position in the marketplace to offer reports to our retail agents, ultimately to support, insured's decisions on the limits they buy.

[00:19:58] So. we collect, you know, data points on every account that every CRC broker writes in the, in the whole company, as a result, we can look at a large data set for a particular industry or typical type of, of account and compare it to the peers. And when you compare it to the competitors and it says, well, okay, You know, your peers by X and you're buying something less than X or, you know, this is where you stand compared to your peers.

[00:20:24] And, you know, not, not saying your peers are always right, but, we always get the question. Well, what, what's my competition doing? What are my peers doing? And so we've, we we've developed that in these benchmark reports or. Readily available. almost every class. That's a business that a CRC casualty broker works on and we can provide those for our retailers to present to the insured in hopes that they understand, you know, another tool along with articles to understand the marketplace better.

[00:20:55] And they're in the business of doing whatever they do well. And making, you know, revenue, they're not in the insurance business. So it's upon us to educate you don't with whatever tools that we can provide. And I think the benchmarking tool is one of the better CRC has to, to, to pass along, to, to help the insured, ultimately understand, you know, what they're facing for their renewal.

[00:21:14] Dan Wentz: [00:21:14] And that's one of the, one of the reasons you should work with CRC. What about, Mark, if you could, tell us why someone should work with a CRM, why should you choose CRC producer at this point? How can you guys help them navigate this, this market and these tough renewals and everything that's going on right now?

[00:21:32] Marv Rubin: [00:21:32] Yeah, I think there's combination of factors here. Talk about the, the items that aren't blue box like different project reports. You know, we use those to our advantage here and try to leverage the markets as best we can, you know, with the classes of business we write, we really intricately know our market's appetite and knowing where they want to be.

[00:21:52] And as that is ever changing, you know, we, we stay in constant contact with our underwriters and. Although that's maybe been a little tougher lately with a work from home. There's nothing like a phone call every now and then to touch base and make sure that what we know that they're there. New day. So I think from us, it's, it's partially the volume of business we write with these guys.

[00:22:13] We understand what the, what they're looking for and how to best pitch it to them and making sure that they understand that we want to bring them the best risks. And I think. Part of what we do a great job of is, not, not creating underwriter fatigue. That that to us has been incredibly important that you're not just drowning them in submissions.

[00:22:31] Cause everybody's scent is marketing, everything they have to, you know, we were very, very careful with our market selection to make sure that what we bring to them is something rifle and, I think that the best thing we've been doing is, you know, we'll, we will, we kind of foresee a stream of tower in our minds.

[00:22:47] We go ahead and we pick up the phone, we call our underwriter and walk them through the risks. So, you know, what could 30 to 30 minute to three hour underwriting process for them could be broken down into a few minutes and making sure that, that the efficiency is there both on our end and theirs really benefits the insured because we're driving the best deal for them from the start.

[00:23:09] So I think that that really has been our, advantage lately is making sure that we're touching on everyone and making sure you're communicating that whether that's good news or bad news throughout the, throughout the chain between us, that the underwriters and the, and the brokers themselves. 

[00:23:24] Philip Cook: [00:23:24] Dan, I think another thing that CRC does a really good job, you know, historically, if you had a risk, you just, you know, down the hall to your fellow broker and said, you know, Hey, you just wrote that deal.

[00:23:35]you know, what market did you use? What rate did you use? I'm working on something similar. you know, going back to the data that we're collecting, we now have internal tools where we can, pull up every account that's been written in CRC that looks like this account, and we can see the data that shows us, you know, what markets wrote it and what rates were there and who wrote it.

[00:23:55] And so we can reach out to, you know, other brokers around the country. And say, Hey, you just wrote this deal. in, in, you know, it looks like my deal that I'm writing, what did you learn? And so we come down the learning curve so much quicker. and so we, we don't have underwriters fatigue because we're hitting the right underwriter with the right risk and that.

[00:24:15] Communication, even though we're all working from home, shown by our, our, the backgrounds of our, of this podcast. But, we're still in communication with everybody across the country. We're still getting all these data points. It's a hugely helpful, in, in, in, in, in marketing and getting the best deals for these insurance.

[00:24:34]and I think it's a huge selling point for all of us at CRC that, that I don't think our competition, quite, does, does as well as we do. 

[00:24:41] Dan Wentz: [00:24:41] Yeah, that's a great point. You know, when you work with Phillip cook, you're not just working with Phillip cook, you're working with Marv, you're working with everybody across the country and that's our casualty practice, advisory committee.

[00:24:53]there is a lot of people out there. I mean, I see the emails all the time. You guys train them back and forth and, getting involved in our ready system, which more and more is coming out about that is that progresses. So, stay tuned to CRC. Or all the latest information, on how we can benefit you.

[00:25:09] Philip Morris, it's been a great conversation again. That's Phillip cook in the Birmingham, Alabama office, and Marv is out West in Redondo beach. If you want to get started with casualty risk, or you want to contact a broker, it's as simple as going to our CRC group. Dot com website and searching out.

[00:25:26] We've got people easily sorted by location by specialty. You can find it. All right there, guys. Thank you very much. Appreciate your time today.