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Sponsored: Liberty Mutual

2015 General Liability Renewal Outlook

As the general liability insurance cycle flattens, risk managers, brokers and insurers dig deeper to manage overall program costs.
By: | September 2, 2014 • 5 min read
SponsoredContent_LM

There was a time, not too long ago, when prices for general liability (GL) insurance would fluctuate significantly.

Prices would decrease as new markets offered additional capacity and wanted to gain a foothold by winning business with attractive rates. Conversely, prices could be driven higher by decreases in capacity — caused by either significant losses or departing markets.

This “insurance cycle” was driven mostly by market forces of supply and demand instead of the underlying cost of the risk. The result was unstable markets — challenging buyers, brokers and carriers.

However, as risk managers and their brokers work on 2015 renewals, they’ll undoubtedly recognize that prices are relatively stable. In fact, prices have been stable for the last several years in spite of many events and developments that might have caused fluctuations in the past.

Video clip: Liberty Mutual’s Mark Moitoso on GL pricing and the flattening of the insurance cycle (Mark Moitoso Clip 1)

Flattening the GL insurance cycle

Any discussion of today’s stable GL market has to start with data and analytics.

These powerful new capabilities offer deeper insight into trends and uncover new information about risks. As a result, buyers, brokers and insurers are increasingly mining data, monitoring trends and building in-house analytical staff.

“The increased focus on analytics is what’s kept pricing fairly stable in the casualty world,” said Mark Moitoso, executive vice president and general manager, National Accounts Casualty at Liberty Mutual Insurance.

With the increased use of analytics, all parties have a better understanding of trends and cost drivers. It’s made buyers, brokers and carriers much more sophisticated and helped pricing reflect actual risk and costs, rather than market cycle.

The stability of the GL market also reflects many new sources of capital that have entered the market over the past few years. In fact, today, there are roughly three times as many insurers competing for a GL risk than three years ago.

Unlike past fluctuations in capacity, this appears to be a fundamental shift in the competitive landscape.

SponsoredContent_LM“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks — things that aren’t necessarily captured in the analytical environment.”
– Mark Moitoso, executive vice president and general manager, National Accounts Casualty, Liberty Mutual Insurance

Dynamic risks lurking

The proliferation of new insurance companies has not been matched by an influx of new underwriting talent.

The result is the potential dilution of existing talent, creating an opportunity for insurers and brokers with talent and expertise to add even greater value to buyers by helping them understand the new and continuing risks impacting GL.

And today’s business environment presents many of these risks:

  • Mass torts and class-action lawsuits: Understanding complex cases, exhausting subrogation opportunities, and wrangling with multiple plaintiffs to settle a case requires significant expertise and skill.
  • Medical cost inflation: A 2014 PricewaterhouseCoopers report predicts a medical cost inflation rate of 6.8 percent. That’s had an immediate impact in increasing loss costs per commercial auto claim and it will eventually extend to longer-tail casualty businesses like GL.
  • Legal costs: Hourly rates as well as award and settlement costs are all increasing.
  • Contractual liability: As the economy rebounds, it is critical for companies to strategically manage the liability they accept and cede to customers, vendors and others.
  • Video clip: Liberty Mutual’s David Perez on the importance of managing contractual liability (David Perez clip 3)
  • Industry and geographic factors: A few examples include the energy sector struggling with growing auto losses and construction companies working in New York state contending with the antiquated New York Labor Law

Video clip: Liberty Mutual’s David Perez on the risks facing GL buyers and brokers (David Perez clip 2)

Managing GL costs in a flat market

While the flattening of the GL insurance cycle removes a key source of expense volatility for risk managers, emerging risks present many challenges.

With the stable market creating general price parity among insurers, it’s more important than ever to select underwriting partners based on their expertise, experience and claims handling record – in short, their ability to help better manage the total cost of GL.

Video clip: Liberty Mutual’s Mark Moitoso on managing GL risks (Mark Moitoso clip 2)

And the key word is indeed “partners.”

“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them — through risk control, claims management and a strategic risk management program,” said David Perez, executive vice president and general manager, Commercial Insurance Specialty at Liberty Mutual.

While analytics and data are key drivers to the underwriting process, the complete picture of a company’s risk profile is never fully painted by numbers alone. This perspective is not universally understood and is a key differentiator between an experienced underwriter and a simple analyst.

“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks — things that aren’t necessarily captured in the analytical environment,” said Moitoso.

Video clip: Liberty Mutual’s Mark Moitoso on (Mark Moitoso video clip 12)

Several other factors are critical in choosing an insurance partner that can help manage the total cost of your GL program:

Clear, concise contracts: The policy contract language often determines the outcome of a GL case. Investing time up-front to strategically address risk transfer through contractual language can control GL claim costs.

“A lot of the efficacy we find in claims is driven by the clear intent that’s delivered by the policy,” said Perez.

Legal cost management: Two other key drivers of GL claim outcomes are settlement and trial. The best GL programs include sophisticated legal management approaches that aggressively contain legal costs while also maximizing success factors.

“Buyers and brokers must understand the value an insurer can provide in managing legal outcomes and spending,” noted Perez. “Explore if and how the insurer evaluates potential providers in light of the specific jurisdiction and injury; reviews legal bills; and offers data-driven tools that help negotiations by tracking the range of settlements for similar cases.”

Video clip: Liberty Mutual’s David Perez on managing legal costs (David Perez clip 5)

Specialized claims approach: Resolving claims quickly and fairly is best accomplished by knowledgeable professionals. Working with an insurer whose claims organization is comprised of professionals with deep expertise in specific industries or risk categories is vital.

SponsoredContent_LM“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them — through risk control, claims management and a strategic risk management program.”
– David Perez, executive vice president and general manager, Commercial Insurance Specialty, Liberty Mutual Insurance

“When a claim comes in the door, we assess the situation and determine whether it can be handled as a general claim, or whether it’s a complex case,” said Moitoso. “If it’s a complex case, we make sure it goes to the right professional who understands the industry segment and territory. Having that depth and ability to access so many points of expertise and institutional knowledge is a big differentiator for us.”

While the GL insurance market cycle appears to be flattening, basic risk management continues to be essential in managing total GL costs. Close partnership between buyer, broker and insurer is critical to identifying all the GL risks faced by a company and developing a strategic risk management program to effectively mitigate and manage them.

Video clip: The benefits of working with Liberty Mutual:
David Perez (David Perez video clip 7)
Mark Moitoso (Mark Moitoso video clip 3)

For more information about how Liberty Mutual can help you manage the total cost of your GL program, visit their website or contact your broker.



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On-Demand Webinar

Webinar: Succeeding with an Unbundled Claims Management Approach

Learn how to succeed with an unbundled claims management approach.
By: | June 19, 2014 • 1 min read

Presenters

Webinar_RisingMS

Overview

Webinar Sponsor

Webinar Sponsor

Unbundling workers’ compensation managed care services can make a lot of sense for some employers. But meeting the demands of a changing environment is a constant challenge whether you are — considering unbundling — have recently unbundled — or want to gauge the effectiveness of your unbundled program. Limited risk management resources, the complexities of data management and transparency, and increased medical costs are combining to push claims executives to improve their approach. Not doing so is to risk bad outcomes, not only for injured workers but for corporate bottom lines.

A diverse panel will offer employer, managed care, and claims executive perspectives on unbundled approaches, including:

  • Considerations when unbundling managed care services
  • An effective team approach, including the coordination of internal resources and the various vendors involved in unbundled claims management
  • Best practices in data management, including addressing the state reporting burden
  • Using performance measures to validate the effectiveness of an unbundled approach

Recording

Download a copy of the slide presentation here.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.
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