Pace of insurance rate increases slowing in 2014: Moody’s

Rate increases for U.S. commercial property/casualty liability insurance should continue throughout this year, but at a slower rate than in 2013, according to an analysis released Friday by Moody’s Investors Service Inc.

In “US P&C Insurance Survey: Slowing Commercial Rate Increases as Insurers Shift Toward Growth,” Moody’s said the insurers it rates are expecting rate increases of about 6% for liability insurance policies written this year, down from 7.5% from last year.

“However, the rate increases are still large enough to continue to expand underwriting margins given that rate increases remain above loss ratio trends,” said Moody’s in the report.

The liability lines covered include workers compensation, commercial general liability, professional liability, commercial auto liability and commercial multiple peril.

Commercial property rate increases are also expected to drop, to 3% this year from 4.5% last year. Moody’s added that given falling reinsurance prices, “we believe that pricing increases could fall even further over the course of 2014 and even decline later in the year if there are no major catastrophes.”

The rate increases for commercial liability lines would mark the fourth straight full year of rising rates, Moody’s said. Rates began to rise in late 2010 and 2011 in response to low investment returns and rising accident year combined ratios, which hit a high of about 110% in 2010 and 2011 but have declined steadily since then.

“We expect commercial casualty insurers’ combined ratios to decline to about 99% for accident year 2014 and 96.5% for accident year 2015 compared to 103% for accident year 2013.”

Moody’s noted that insurers also indicated an increased willingness to write new business for workers comp and commercial general liability.

“As insurers look to retain existing profitable business and shift toward growth for casualty lines, rate increases could slow further as the year progresses, although we don’t expect rate declines in 2014,” said Moody’s. “Companies’ risk appetite for professional liability and commercial auto liability continues to moderate.”

What Your Homeowners Insurance Doesn’t Cover

All insurance policies have limitations and exclusions on the things they’re covered, and the amounts you may be able to receive as reimbursement. Your health insurance policy, for example, won’t cover every type of illness and accident or other malady that may affect you. Even umbrella insurance policies have coverage limits and exclusions for certain types of claims.

The same is also true with your homeowner’s insurance policy. You might assume that you’ll be fully covered in compensated for any damage that might happen to your home, for whatever reason, but that’s simply not the case.

Everyone’s policy is different, but here is some insurance advice on things that are excluded from most homeowner’s policies.

Flood Damage. This is potentially one of the biggest exclusions from coverage in a standard homeowner’s insurance policy. A traditional policy will cover damage from wind storms, but not the flooding that often occurs at the same time. Flood coverage is generally available (and may actually be required by your bank when you take out a mortgage), but the policy is separate and additional to the standard policy, and will require you to pay an additional premium.

Replacement Value or Rebuilding. The standard homeowner’s policy provides you with a maximum dollar amount that you’d be eligible to receive in the event of damage that’s covered by the policy. This is not the same thing as being sure you’ll be able to rebuild your home if it’s ever destroyed. Depending on how you’ve improved your home, the health of your local real estate market, and whether your current policy coverage is up to date, there might be a significant shortfall in your coverage amount in terms of being able to rebuild your home.

Home Business Equipment and Liability. Your homeowner’s policy is likely to exclude any coverage of business assets or activities that you conduct from your home. This might not be a big deal if your only business assets are a fax machine and a filing cabinet. But if you’re running a larger home business in your garage or kitchen or basement then this could represent a significant gap in your coverage. Furthermore, liability for injuries arising out of your home based business needs to be covered by a business insurance policy, and are generally excluded from your homeowner’s coverage.

Certain Recreational Improvements. Your homeowner’s policy will include coverage for certain personal injuries that may occur within your home, but particular liabilities are likely to be excluded. For example, injuries that arise from guests using a trampoline or swimming pool on your premises probably won’t be included in a standard policy, and will require a specific rider if you want to be protected.

Finally, pay attention to the deductibles that are contained within your homeowner’s policy. Even if you experience a loss that’s covered by your policy, you’ll be responsible for these premiums yourself. Review these deductible levels from time to time to make sure that they’re appropriate for your financial situation, and that they result in affordable premiums.