2021 Cyber Liability Insurance Market Outlook

Across industry lines, cyberattacks have surged in frequency and sophistication, resulting in a rise in cyber losses. In these market conditions, we predict that most policyholders will experience higher cyber liability insurance rates in 2021. Insureds may also encounter coverage restrictions or exclusions for losses stemming from specific types of cyber incidents, while still having more generous coverage terms for other exposures. Policyholders who operate in industries with greater cyber exposures may experience more severe rate increases.

Trends to Watch

Push for standalone policies – In the midst of growing cyber risks, most standard property and liability policies have begun implementing exclusions for cyber exposures to avoid unexpected losses. As such, it’s critical for organizations that don’t already have one to seriously consider securing a standalone cyber liability policy.

Remote work exposures – The COVID-19 pandemic forced many organizations to have their staff work from home for the first time. Unfortunately, these telework arrangements led to a rise in cyberattacks, as many cybercriminals have targeted remote employees in various phishing incidents.

Ransomware concerns – Ransomware is used by cybercriminals to compromise a device and demand a large payment be made before restoring the technology—as well as any data stored on it—for the victim. The number of ransomware attacks has spiked in the past few years. In response, some insurance carriers have revised coverage conditions related to ransomware incidents.

Regulatory ramifications – A multitude of both international and domestic jurisdictions have recently debuted new data protection laws aimed at increasing responsibilities and compliance considerations for organizations that handle sensitive data. Looking ahead, more and more states are expected to pass similar legislation—increasing employers’ regulatory exposures in the realm of data protection.

Fallout from SolarWinds – In 2020, the U.S. government revealed that hackers infiltrated the company SolarWinds’ network monitoring platform via malware before using that platform to access sensitive data from several government departments and private organizations. The fallout from this attack has motivated businesses, the insurance industry and government entities to take a closer look at their supply chain cybersecurity risks.

2021 Price Prediction

Overall: +10% to +30%

Tips for Insurance Buyers

  • Work with your insurance professionals to understand the types of cyber coverage available and secure a policy that fits your needs.
  • Utilize security services offered by insurance carriers and third-party vendors to strengthen your cybersecurity measures.
  • Focus on employee training to prevent cybercrime from affecting your operations.

As has been the case since 1950, the professional agents and underwriters at Morris & Reynolds Insurance are happy to help you. Reach out for more workplace guidance or to learn more about the power of voluntary benefits. Please contact us at any time at 305.238.1000.

2021 Commercial Auto Insurance Market Outlook

For the past decade, the commercial auto insurance space has been largely unprofitable for carriers. In this environment, many carriers have elevated premium costs. Unfortunately, this hard market is expected to continue into 2021. As such, we predict that most businesses with commercial auto exposures will have a more difficult renewal process by way of greater premium rates (potentially even double-digit rate increases), lowered capacity and further policy restrictions. Insureds with large fleets or a poor loss history may experience more significant rate increases.

Trends to Watch

Delivery exposures – Due to the COVID-19 pandemic, some organizations have extended delivery services or hired delivery drivers for the first time. Doing so carries new commercial auto exposures.

Driver shortages – In the midst of widespread driver shortages, many organizations have had to lower their driver applicant standards to fill open positions. These drivers often have fewer years of experience, making them more likely to be involved in an accident on the road. What’s more, many organizations are having their experienced drivers work longer hours, leading to driver fatigue.

Distracted drivers – Data from the National Highway Traffic Safety Administration indicates that up to 391,000 people are injured and 3,450 people are killed in crashes involving distracted drivers each year. As these incidents increase, commercial auto insurance costs have climbed in tandem.

Additional vehicles on the road – The Department of Transportation estimates that an additional 2.6 million vehicles will be registered in the United States during 2021. This means a higher number of drivers will be on the road, increasing the risk of accidents and subsequent claims.

Elevated accident costs – As accidents steadily increase, their associated costs have followed suit. First, the monetary value of technological advancements in commercial vehicles has elevated vehicle repair costs in the event of an accident. Second, because injuries from accidents often require several doctor visits or even surgery, this extends recovery time and increases overall medical costs.

Nuclear verdicts – Such verdicts—which refer to jury awards in which the penalties exceed $10 million—have become increasingly prevalent in the commercial auto space. As a result, attorneys are more inclined to go to trial. This extends litigation and significantly raises the cost to defend a claim.

2021 Price Prediction

Overall: +5% to +25%

Tips for Insurance Buyers

  • Examine your loss control practices relative to your fleet and drivers. Enhance your driver safety programs by implementing or modifying policies on safe driving and distracted driving.
  • Design your driver training programs to fit the unique needs of your business. Implement a driver- or employee-retention program to maintain experienced drivers.
  • Determine whether you should make structural changes to your commercial auto policies by speaking with your insurance professionals.

As has been the case since 1950, the professional agents and underwriters at Morris & Reynolds Insurance are happy to help you. Reach out for more workplace guidance or to learn more about the power of voluntary benefits. Please contact us at any time at 305.238.1000.

2021 Employment Practices Liability Insurance Market Outlook

Like other lines of insurance, the employment practices liability (EPL) insurance market has hardened. This is due in part to a higher frequency and severity of claims in recent years, as well as increased legislative activity at the state and federal levels. As such, we predict that the majority of businesses will experience rate increases, coverage reductions and additional retention requirements in 2021. Large organizations and insureds who operate in riskier states may encounter more significant rate increases.

Trends to Watch

Pandemic-related claims – The ongoing COVID-19 pandemic has forced many organizations to make workplace changes. And with these changes, EPL claims followed. Some of the top pandemic-related EPL claims include allegations regarding employee leave concerns and remote work capabilities, allegations of discrimination related to workplace adjustments or layoffs, and allegations of retaliation after an objection to unsafe work conditions.

Social movements – The #MeToo movement largely contributed to a 50% rise in sexual harassment lawsuits against employers over the past few years, according to the U.S. Equal Employment Opportunity Commission. Looking ahead, the Black Lives Matter movement has the potential to become a driving factor in race-related workplace discrimination and harassment lawsuits.

LGBTQ+ protections – The U.S. Supreme Court confirmed in 2020 that Title VII of the Civil Rights Act of 1964 protects gay and transgender employees from workplace discrimination and harassment based on sexual orientation, gender identity and gender expression. This is a new development, but the Supreme Court’s decision could lead to additional discrimination-based EPL claims in 2021.

Age discrimination issues – According to the U.S. Bureau of Labor Statistics, the share of employees over the age of 55 is expected to rise to nearly 25% by 2024. This demographic shift makes it vital for employers to take steps to minimize the potential for age discrimination issues in the workplace. Such discrimination can lead to poor staff morale, a tarnished reputation and a rise in EPL claims.

Marijuana legalization – Following the 2020 election, medical marijuana is now legal in 36 states and recreational marijuana is now legal in 15 states. As a result, some states have enacted legislation that restricts an employer’s ability to conduct drug tests for marijuana. Further, several state court cases have ruled in favor of the employee in recent employment lawsuits related to marijuana usage.

2021 Price Prediction

Overall: +10% to +30%

Tips for Insurance Buyers

  • Review your employee handbook and related policies. Ensure you have all appropriate policies in place, including language on discrimination, harassment and retaliation.
  • Take note of any organizational changes created by the COVID-19 pandemic. These changes should be reviewed to ensure they are compliant with employment law.
  • Document all evaluations, employee complaints and situations that result in employee termination and discipline.

As has been the case since 1950, the professional agents and underwriters at Morris & Reynolds Insurance are happy to help you. Reach out for more workplace guidance or to learn more about the power of voluntary benefits. Please contact us at any time at 305.238.1000.

2021 Workers’ Compensation Insurance Market Outlook

The workers’ compensation insurance market has remained mostly stable, performing as an outlier relative to other lines of insurance by producing profitable underwriting results. According to the National Council on Compensation Insurance (NCCI), the private carrier combined ratio for workers’ compensation in 2020 is estimated to be 86%, compared to an 85% ratio for 2019. Yet, some emerging trends have the potential to cause an uptick in workplace accidents and claims. For 2021, we predict that workers’ compensation rates will remain stable, with moderate rate increases becoming the norm.

Trends to Watch

COVID-19 presumptions – Several states have enacted legislation regarding COVID-19 presumptions (the conditions in which an employee’s injury or illness is presumed to have happened on the job and should be compensated), increasing the likelihood of pandemic-related claims. Specifically, some states have updated their statutes to include presumptive liability, which provides workers’ compensation benefits to a larger spectrum of employees—namely, essential workers who contract COVID-19. Although such laws are rebuttable, overcoming presumptions is a difficult feat, seeing as the burden of proof in these cases is often being pushed to the employer rather than the employee.

Mega claims – A mega claim is an exceptionally large claim—totaling $3 million or more in incurred losses—that typically stems from an employee getting seriously injured on the job. These claims can result in hefty costs, lost time and reputational damage for affected organizations. According to data from the NCCI, these claims have reached a 12-year high—increasing in both frequency and severity.

Comorbidities – Comorbid conditions are typically long-term health complications that have the potential to increase the severity of other injuries or illnesses that the affected individual may experience, making it more difficult to fully recover. According to a study conducted by the NCCI, workers’ compensation claims involving comorbidities have nearly tripled since 2000.

Qualified worker shortages – Labor shortages have forced many employers to hire inexperienced workers. However, doing so increases the risk of accidents occurring. This is because inexperienced workers often lack years of safety training and may be more willing to take unnecessary risks.

An aging workforce – According to the U.S. Bureau of Labor Statistics, the share of workers over the age of 55 is expected to increase to nearly 25% by 2024. This is concerning, as the cost of workers’ compensation claims often increases as employees age. After all, because health typically diminishes with age, even minor injuries can be more severe for older workers—taking them longer to recover.

2021 Price Prediction

Overall: Flat to +5%

Tips for Insurance Buyers

  • Implement safety and health programs to address common risks, especially when using a loss-sensitive workers’ compensation program.
  • Conduct routine safety training for employees of all ages and experience levels.
  • Develop an effective return-to-work program that properly supports employees in the process of healing from a work-related illness or injury and resuming job duties following their recovery.

As has been the case since 1950, the professional agents and underwriters at Morris & Reynolds Insurance are happy to help you. Reach out for more workplace guidance or to learn more about the power of voluntary benefits. Please contact us at any time at 305.238.1000.

2021 D&O Insurance Market Outlook

In the midst of a new decade, insurance experts anticipate that the directors and officers (D&O) liability market will be the hardest it’s ever been. With this in mind, we predict that many businesses will experience significant rate increases, fewer markets, lower available limits, more robust underwriting and higher retentions in 2021. Insureds may also encounter various coverage reductions—including extended reporting period terms, the elimination of shareholder derivative demand investigative costs coverage and additional policy restrictions related to Side A insurance. Public entities that belong to high-risk industries may experience more severe rate increases and coverage reductions.

Trends to Watch

COVID-19 concerns – The pandemic forced many organizations to make operational changes. Such changes can carry various D&O exposures due to the risk of stakeholders or shareholders alleging that senior leaders mismanaged the organization. A lack of changes can also cause D&O concerns, as stakeholders could allege that senior leaders failed to respond appropriately to COVID-19.

Insolvency issues – The global recession has led to many employers experiencing insolvency issues, which is a key contributor to D&O claims. Such claims can result from stakeholders alleging that senior leaders failed to plan for financial disruption, putting them at fault for economic hardships.

Cybersecurity struggles – Cyberattacks continue to increase in both cost and frequency, which can result in D&O claims. Specifically, stakeholders affected by a cyberattack may allege that senior leaders failed to address cybersecurity threats or establish a plan for responding to an attack.

Environmental, social and governance (ESG) – Multiple ESG activism topics have made an impact on the D&O market in recent years. First, the issue of climate change has motivated organizational shareholders to hold senior leaders accountable for ensuring eco-friendly operations. Second, the Black Lives Matter movement has caused organizational stakeholders to call out senior leaders on their alleged failures to promote equality and inclusion in the workplace. Third, the #MeToo movement has led to a rise in D&O litigation, as stakeholders have alleged that organizations’ senior leaders engaged in sexual harassment or were negligent in responding to such allegations.

Derivative claims – These claims—which have become increasingly common in the D&O market—entail one or more shareholders filing a lawsuit on behalf of an organization against a specific individual (or several individuals) on the senior leadership team. Derivative claims often arise from shareholders alleging that senior leaders failed to act accordingly in the midst of major disasters.

2021 Price Prediction

Private/nonprofit entities: +10% to +50%
Public entities: +20% to +70% or more

Tips for Insurance Buyers

  • Examine your D&O program structure and limits alongside your insurance professionals to ensure they are appropriate and take market conditions and trends into account.
  • Consult insurance professionals to gain a better understanding of your D&O exposures and cost drivers in the market.

As has been the case since 1950, the professional agents and underwriters at Morris & Reynolds Insurance are happy to help you. Reach out for more workplace guidance or to learn more about the power of voluntary benefits. Please contact us at any time at 305.238.1000.