Wells Fargo Insurance Market Outlook: Favorable News for Cyber Security While Uncertainty Surrounds Healthcare Reform
The reports also highlight anticipated changes in the rate and pricing environment, including market capacity, cost of prescription drugs and the declining rates of cyber security liability. Additionally, both outlooks address how potential changes to the ACA may affect the insurance industry overall.
What to expect with Employee Benefits
According to the Employee Benefits Outlook, employers will continue to face rising medical and prescription drug costs. Health insurance premiums have increased 213 percent since 1999 and will continue to rise. Spending on specialty drugs also continues to rise, with no immediate signs of decreases for medications commonly used to treat complex, chronic and rare conditions.
“In today’s environment, employers must work a little harder to improve the health of their population while minimizing increasing costs for their employees. Increasing the level of enrollment of the workforce into medical programs is also critical, especially for companies with a high percentage of millennials, who will make up half of the workforce by 2020,” said Dan Gowen, national practice leader with Wells Fargo Insurance.
According to the report, 75 percent of employers are concerned about employment retention rates for millennials, while only 28 percent plan to make changes to benefit plans to be more attractive to the millennial population.
The report also found that both telehealth and in-person clinics will play a role in the delivery of care in 2017 and beyond. Telehealth includes virtual medical services through live video and digital-and-monitoring tools. Convenience care clinics, like those offered in grocery stores and pharmacies, will also remain attractive to consumers this year, particularly as access to primary care becomes more difficult.
What to Expect with Property and Casualty
“In the property and casualty segment, the market will continue to see rate reductions for the majority of customers, although slightly lower than prior years,” said Doug O’Brien, national practice leader for Wells Fargo Casualty and Alternative Risk Group. “Potential changes to the ACA could also impact workers’ liability, as injured employees may file more workers’ compensation claims, in lieu of healthcare claims.”
There’s some good news for cyber liability insurance. Insurance rates are declining due to the lack of recent large data privacy events as well as increased competition among insurance providers, according to the report. Still, cybersecurity concerns remain very high.
“The threat landscape is evolving daily. Making data and network security a company priority will help mitigate loss, but not prevent it,” said Meredith Schnur, national practice leader for Wells Fargo Insurance Professional Risk Practice. “For companies with a strong culture of protecting data and systems, this is an ideal time to purchase cyber liability insurance.”
The Insurance Market Outlook report also highlights key trends within 18 sectors of the industry, including:
- Property. The sector remains extremely competitive from a pricing perspective.
- Liability. Automobile liability capacity remains adequate, but shrinking somewhat for larger fleet risks.
- Worker’s compensation. Deteriorating returns on investment will drive more stringent pricing and underwriting.
- International. Policy changes related to Brexit are likely.
- Network security and privacy risk (cyber). The issue remains at the board level and top-of-mind for leaders in the risk space.
- Environmental. Threats, such as water pollution and environmental terrorism, propel the demand for this coverage, which is growing 30% year over year.
- Aviation. Drones and other unmanned aircraft systems (UAS) continue to be a big unknown in the aviation insurance market.
- Public company directors’ and officers’ liability. An increase in securities class-action filings continues to be a hot topic.
- Fiduciary liability. The market continues to watch the litigation environment, which may influence rates.
- Private/non-profit management liability. Carriers are working to differentiate themselves through coverage terms, offering enhancements and extensions, rather than competing solely on premium.
- Employment practices liability. The market remains flat, but timely notification of claims is critical.
- Crime. Coverage for certain exposures (such as impostor fraud) will impose new burdens on organizations to evaluate their policies and procedures.
- Medical malpractice. The industry is shifting from individual claims to ‘batch’ claims.
- Kidnap, ransom and extortion (KRE). KRE will be indispensable for organizations with international travel exposure.
- Representations and warranties (R&W). As awareness around R&W increases, more carriers will continue to enter into the market.
- Technology and professional errors and omissions. Rates are declining for the first time in many years due to the lack of complex litigation in 2016.
- Commercial surety. The acquisition and shortage of seasoned surety talent is an industry-wide concern.
- Contract surety. Limited premium dollars are being chased by numerous markets.
About Wells Fargo Insurance
Named one of the top 10 insurance brokers in the U.S. by Business Insurance , Wells Fargo Insurance provides solutions for a wide range of customers, including retail consumers, high net worth individuals, small businesses, as well as middle market and large corporate customers. Wells Fargo Insurance writes or places \\$9 billion of risk premiums annually in property, casualty, benefits, international and personal lines.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with \\$1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.