Long-Term Trends Show Commercial Premiums Rising

Recent insurance premium statistics from the Council of Insurance Agents & Brokers (CIAB) confirm the durability of the current long-term hard insurance market. The CIAB’s Commercial Property/Casualty Q2 2023 Market Index Report makes a strong case for looking outside the traditional market to alternative risk transfer methods.

Group captive insurance is an alternative worth exploring for companies prioritizing workplace safety but still facing consistent premium increases. We’ll cover some of the inherent cost-control features of group captive insurance here. First, though, let’s look at the premium trends from the CIAB report.

Stats Underscore Long-Term Premium Growth

• During the second quarter of this year, overall premiums increased at nearly the same rate (8.9%) as the previous quarter (8.8%). It was the 23rd consecutive quarter of increases.
• The increases were highest for medium-sized accounts at 9.8% — just above the 9.7% increase for large accounts.
• Commercial auto premiums increased by 10.4% — the 50th consecutive quarter of premium hikes.
• Commercial property premiums grew 18.3% — the most of any line. Economic inflation that continues to increase property values and natural catastrophe losses (specifically multiple severe thunderstorms in the first half of the year) were the major contributors to the premium surge.

The full Commercial Property/Casualty Q2 2023 Market Index Report is available on CIAB’s website.

A Potential Remedy for Long-Term Insurance Inflation

For many companies, group captive insurance can offer a promising option in an otherwise bleak insurance market. The member-owned group captives we support have inherent features designed to enable already safety-conscious companies to reduce their overall cost of risk amid upward cost pressures driven by inflation and other factors.

A recently published Executive Brief from the Insurance Information Institute (Triple-I) reveals how the cost-control features of group captives give member-companies opportunities to buck the long-term insurance premium growth trend.

• Premiums are based primarily on member-companies’ actual loss experience, affording them the opportunity to lower their premiums by controlling their losses.
• Member-companies gain greater transparency and participation in the claims adjudication process, which can help to close claims more quickly and with potentially more favorable outcomes.
• Group captives attract companies with best-in-class safety records that collectively form a preferred-risk pool.
• Group captives offer programs such as risk control workshops and monthly webinars that provide best practices in areas such as worker safety. The continued commitment to improving risk control and safety helps members reduce the frequency and severity of losses.
• Member-companies have the potential to earn dividends from unused loss funds, a financial benefit that can help offset growing premiums.

Ultimately, the distinguishing factor is control: Group captive insurance offers companies more opportunities to control insurance premiums than traditional plans, which is especially beneficial in hard markets. According to the Triple-I Brief, group captives “can provide a viable way to protect companies across several lines of casualty insurance. Their prominence is likely to grow as economic and litigation trends continue to increase costs, prompting companies to continue to seek effective risk financing programs offering superior cost control.”

The full Triple-I Executive Brief Group Captives: An Opportunity to Lower Cost of Risk provides a complete overview of the benefits of group captive insurance.