After an extended soft insurance market across most P&C coverage lines (Auto being the notable exception), industry-wide pricing measures have begun to show modest increases. Based on a survey from industry data provider IVANS, General Liability renewal pricing was up 2-2.5% over the course of 2018, Property pricing was up 3-4%, and Umbrella pricing was up 1.5-2.5%. Auto continues to be challenged and was up ~4.5%. These increases were partly offset by Workers’ Compensation pricing, which was down 2.5-3.5%.
Over the last year, we’ve noted significant differentiation between “clean” accounts and those that are perceived as higher-risk. Clients with attractive loss history and well-established risk management processes have benefitted from aggressive pricing, but insurers have taken a harder line with accounts they view as unprofitable or at the edges of their normal risk appetite.
On the Employee Benefits side of our business, we’ve observed (and welcomed) a slowdown in rate increases. While health insurance expense remains a significant burden for employers, cost increases are less of an issue than they have been in recent years. At the same time, benefit designs are becoming more complex and often less generous, so we have been working with groups to communicate effectively with their employees about how to navigate these changes and promote wellness.
As the labor market has continued to tighten, we anticipate employers and HR professionals becoming more focused on cost-effective ways to enhance recruitment and retention. Benefits programs are an important component of this, but they must be supported by other strategies around talent development, training/feedback, and inclusion.
ERRORS & OMISSIONS COVERAGE
Simple question: if your firm made a significant error in its work or delivered a faulty product, could there be financial consequences for your client? General Liability policies do not cover an insured’s potential responsibility for a third party’s financial loss. For many companies, this is a critical gap in coverage that can be mitigated with an Errors & Omissions (E&O) policy.
Hypothetical Claims Scenarios:
- Construction Management: A construction project needed to be partially torn down and rebuilt because an electrical contractor installed wiring that did not meet engineering specifications. In addition to the cost of rebuilding, the end client incurred financial losses of $500k due to the resultant delay in occupancy. The end client sues its general contractor for these losses, alleging the GC failed to properly inspect and oversee the project.
- Technology: A firm provides booking software for hotels. Due to a coding error that is pushed through the system during a routine update, unintentionally discounted rates are made available to the public. Hotels suffer an economic loss as guests demand that they honor the erroneous rates or cancel their reservations. Some hotels seek to hold the software provider liable for their economic loss.
- Manufacturer: A Tier 1 auto supplier has contracted with a Tier 2 supplier to provide a specifically designed casing. The Tier 1 discovers a manufacturing error in the casing during its intake process. Because it operates on a just-in-time inventory basis, it is unable to operate several of its lines while the Tier 2 corrects the error and produces a new run of casings. The Tier 1 incurs $100k of overtime and increased transportation costs to meet its own delivery deadline, and it seeks to hold the Tier 2 supplier responsible for these costs.
The most obvious purpose of E&O coverage is to protect against costly litigation and commercial disputes that could arise from your firm’s errors. In addition, E&O coverage can be an asset for your business by providing assurance to your clients that they will have recourse if you err.
E&O policies and their terms vary significantly based on an insured’s industry, level of professional expertise, clientele, and track record. E&O policies are typically issued on a Claims Made form, so careful consideration must be given to retroactive dates, timely claim reporting, and tail coverage if the insured is sold. We encourage you to consider your potential exposure and discuss any questions or concerns with your RBN professionals.
OSHA LOG SUBMISSION
Quick Reminder: OSHA Log Summaries (Form 300A) must be electronically filed by March 2, 2019. Additionally, many businesses must post their Log Summary in a common area of the workplace from February 1 through April 30. RBN has a number of resources to help you understand your reporting obligations, complete your Log Summaries, and even set up and maintain your electronic logs. If you have questions about how we can help, please reach out to any member of your RBN team.
WHAT WE’RE READING
Insurance Journal: 2018’s Costliest Natural Disasters
WSJ: PG&E: PG&E: The First Climate-Change Bankruptcy