Westfield Insurance leader expects property hard market going into 2024
“Many have not lived through this level of change before”
Pressure continues to build in the property and auto insurance markets, and ‘hard’ conditions are likely to extend into 2024, according to one commercial lines leader.
“This is a period where carriers are seeing their loss trends increase, the reinsurance market is tightening, which creates the need to increase their rates,” said Troy Crawford (pictured), commercial lines product management leader at Westfield Insurance, which provides business property and liability, personal lines and agribusiness insurance.
“What you’re also seeing is a lot of announcements by insurance companies pulling back on the types of business that they’re willing to write. We see a lot of [these actions] geographically, such as in California, where a lot of carriers are pulling back.
“We don’t have any plans to do those types of actions, but I do expect that we’re going to continue to feel the hard market impacts going into 2024, particularly for property and auto.”
What will continue to drive property hard market conditions?
Price spikes in building materials and labor, coupled with higher interest rates, have driven up replacement costs in a short period of time.
“Over the past two years, we’ve been facing career high changes in some of the costs of building materials and labor for property construction,” Crawford said. “A lot of underwriters and agents may not have lived through this level of change before.”
Apart from inflation, pandemic-era supply chain issues and reconstruction activity in the wake of extreme weather events has helped to push up prices.
“It’s not so much new construction [that’s driving construction costs up], but it’s repairs from all the catastrophe activity over the last six months,” Crawford noted.
“The hurricane that’s come to Florida, and the hail and convective storm losses in the Midwest, particularly at the end of December, have created a big surge in home repairs, and that’s been pushing on raw material and cost of labor prices as well.”
Price increases seen to moderate
Inflation rose 3% in the year to June, down from 4% in May, according to the latest figures. The rate has fallen sharply from the four-decade high of 9.1% recorded in June last year.
However, price increases are still higher than the Fed’s 2% annual target rate, meaning that more interest rate hikes might be on the horizon.
Crawford, for his part, sees the rise in construction material and labor costs moderating for the rest of the year.
“We do expect that in 2023 we’re going to continue to see some of the increases that we’ve been talking about,” he said. “But we are starting to see some of those prices moderate. The cost of lumber is starting to come down. We’re starting to see a little bit more stability.
“But again, it’s very volatile. We talked about a pending recession, and what that might do to the marketplace. So, we are expecting additional volatility as we go forward.”
Agents urged to check property values
The current environment underscores the need for insurance agents to make sure property insureds have the correct coverage levels, according to Crawford.
“Depending on the material and the geographic location, we’re still seeing big increases and volatile increases,” said Crawford.
“That’s why it’s important for our agents and customers to ensure that they have the appropriate coverage to protect against property losses. We can’t assume that the valuations we did two, three, or four years ago have kept up with those inflationary trends.”
So-called “wellness checks” between agents and their clients are a good opportunity to highlight any building updates that carriers need to be aware of.
“It’s a good time, as we’re updating that valuation, to also validate the data that we’re using,” said Crawford. “So, what I would suggest is that we just partner better. We’re trying to get our renewals out earlier to give agents more time.
“This is so that they can understand some of the changes that are happening with the policies, and work with customers to update property values and make other modifications, such as to the policy deductible, that might help mitigate some of the price increases they’re seeing.”
Are you an agent or broker working with insureds on their property values? Tell us about your experience in the comments below.
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