Commercial Insurance Trends in 2017

Posted by Trindl Reeves, Principal, Chief Sales Officer on January 23, 2017 at 10:00 AM
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Happy New Year, everyone. As we begin 2017, let’s take a look at what’s going on in three specific areas of insurance: Workers’ Compensation, Cyber & Data Security, and Auto. Let’s also consider the impact of these trends and discuss some appropriate actions you might want to explore.  

Workers’ Compensation

In California, workers’ compensation rates are declining and the California Department of Insurance has recommended over 10% rate reduction since this time last year. However, there are a few changes that could impact your business.

Experience Modification

Effective January 1, 2017, The Workers' Compensation Insurance Rating Bureau of California (WCIRB) is calculating experience modification (ex-mod) using a different formula. Ex-mod provides employers with a financial incentive to reduce workers’ comp claims. The new formula was developed with hopes of leveling the playing field for small businesses by penalizing companies based on their size (total payroll) and their frequency of claims versus severity.

Takeaway: The net cost to the worker’s compensation system is neutral, but roughly 50% of our clients will see an increase in their ex-mod. Find out if your premiums will be going up this year by asking your insurance brokers to calculate your projected ex-mod using the new formula.

AB 2883

Beginning January 1, 2017, AB 2883 went into full effect in California, changing the exclusion requirements for directors and officers. Under this change to the labor law, an officer must own no less than 15% of the company to qualify for exclusion from workers’ compensation coverage.

Takeaway: Employers in industries with high-rated class codes can expect further increased costs for officers that can no longer be excluded because they own less than 15% of the company.

If you’d like to exclude officers and directors from workers’ compensation coverage, make sure to complete the necessary waiver, otherwise they will be considered an employee. Changes will not take effect until the insurance carrier approves the exclusion.

First Aid

The Workers' Compensation Insurance Rating Bureau of California (WCIRB) now requires insurance carriers to report all first aid claims. In order to do so, policy holders will need to submit a claim any time medical care is provided. To find out what is considered first aid, click here.

Takeaway: We expect frequency of claims to increase and considering the new ex-mod calculation, this will negatively impact workers’ comp ex-mod calculations and premiums. Educate your internal safety teams on these changes and how to handle first aid type injuries.

Cyber & Data Security

Cyber & Data Security continues to be a hot topic and a crucial form of business insurance. Currently, premiums for cyber liability are still low at $2.5 billion globally and with $1 billion of that from policies purchased in the United States. However, total premiums are expected to jump to $20 billion by 2020. While small- and medium-sized businesses are beginning to understand that they are at risk for a cyber-attack, many are unprepared.

  • 87% of claims came from companies with under $2 billion in revenue.
  • 49% of claims were from companies with less than $50 million in revenue.
  • 30% of breaches were employee-related, such as from a social engineering scam[1]

Takeaway: Systems Failure is a more recent type of coverage, which includes things like human error or mistakes that take down a computer system. Business Interruption and Dependent Business Interruption are increasingly important due to outsourced IT and offsite data servers. Talk to your broker about which types of cyber coverage are right for your company.

Auto Insurance

Automobile premiums continue to rise for both businesses and personal lines. Traffic, distracted drivers, accident severity, and the rising cost to repair cars impact these losses. In 2017, rates will rise at least 3-10% due to the amount of claims across the board.

Takeaway: Driver safety is a huge concern.  Employers should be diligent in their process to hire safe drivers and use these best practices as part of their Driver and Fleet Safety Program.

The New Year brings with it a number of changes to insurance law and coverage, along with the associated impact on premiums. While some of these changes present challenges for some companies, there are actions you can take for optimal outcomes. If you are a California employer, pay particular attention to workers’ compensation at the start of this year.  For all companies, in all industries, consider adding a review of your cyber risk and your auto safety policies to your 2017 goals.  You can learn more about cyber coverage here and stay up-to-date on insurance tips and trends throughout 2017 by subscribing to the Boardroom blog.

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[1] NetDiligence. "2016 Cyber Claims Study." NetDiligence.Web. 17 Jan. 2017. <>.

Topics: Property + Casualty, Market Trends

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